Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Oral Answers to Questions — HEALTH

The Secretary of State was asked—

Health Authority Allocations

Mrs. Louise Ellman: When he will announce the additional individual health authority allocations as outlined in the Budget. [38671]

The Secretary of State for Health (Mr. Frank Dobson): I have announced today each health authority's share of the first £288 million of the extra funds that we have provided to reduce hospital waiting lists this year. Liverpool will get an extra £3,193,000. There is more to come.

Mrs. Ellman: I very much welcome my right hon. Friend's statement about additional funding for Liverpool. Will he confirm that that is in addition to the £11.4 million extra already announced for Liverpool health authority? What steps does he intend to take to ensure that the money provided by the Government is used for the purpose for which it is intended—reducing waiting lists?

Mr. Dobson: I can confirm my hon. and numerate Friend's arithmetic. I am taking steps to ensure that every penny that is earmarked for reducing waiting lists will be spent on that alone.

Mrs. Virginia Bottomley: Every health authority will welcome any additional money, particularly as the Secretary of State has signally failed to use the Red Book figure as the basis for negotiation to deliver an adequate return for the health service. Why does he not support NHS research and development? Why has he reduced the percentage of NHS money going to research and
development—reversing the Culyer commitment—when he is proclaiming the importance of evidence-based medicine?

Mr. Dobson: The right hon. Lady will know from the figures that we have published today that my initiative, using the money provided by the Chancellor in the Budget, will give her health authority an extra

£3.4 million to reduce waiting lists in her constituency. Our principal target for the moment is to reduce waiting lists. The waiting lists that we inherited were too high.

Mr. Owen Paterson: They are higher now.

Mr. Dobson: They are higher still now, but they will come down. The reduction will be greater than any seen in the history of the national health service, because the money will be spent on what it is intended for.

Mr. Bob Blizzard: I greatly welcome the additional £3.5 million being allocated to Suffolk health authority, from which my constituents will benefit. I also welcome the announcement that the money will be used to cut waiting lists. How does my right hon. Friend expect the health authority to distribute the money? Will it take into account the length of waiting lists in different parts of the area?

Mr. Dobson: Provided that they reduce waiting lists, I want to leave matters as much as possible to the initiative of those responsible locally. Their targets will be spelled out to them and made public in due course.

Mr. John Maples: Will the new allocation to Lambeth, Southwark and Lewisham health authority remedy the situation of an elderly diabetic and cardiac patient who has contacted me? Last September he was given an appointment to see a diabetes consultant in April. That appointment has been cancelled, and he has been given a new appointment for June. In January he was given an appointment with a cardiac consultant for June—a five-month wait. That has been cancelled and he has been given a new appointment for October. Why should he have any confidence in the Secretary of State's stewardship of the NHS?

Mr. Dobson: If the hon. Gentleman wants to raise individual cases with me, I am prepared to take them up and pursue them. If he is asking what Lambeth, Southwark and Lewisham is getting of the new money allocated to reduce waiting lists, I can tell him that it is £5.6 million. I think that that is a substantial sum. If the hon. Gentleman is going for specific cases, I can tell him that his health authority, Warwickshire, will be getting £2.8 million from the new allocation.

Dr. George Turner: I know that the more than £2.2 million allocated to my constituency will be particularly welcome. Given that my right hon. Friend has said that we will be told the targets, and given that he has, I believe, said that money that is being held back will in due course be distributed, will he say on what grounds extra funding will be provided? I would certainly like to get on to my health authority to ensure that it meets the targets.

Mr. Dobson: The initial share is simply intended directly to increase the number of operations. Some of the remaining money—more than £100 million—will be held back so that it can be used to make improvements in primary care, mental health or community services that would indirectly lead to a reduction in waiting lists.


Various health authorities and trusts will be invited to say how much of that money they would like and how they intend to spend it.

Homeopathy

Mr. Desmond Swayne: If he will make a statement about the licensing of homoeopathic medicines. [38672]

The Minister for Public Health (Ms Tessa Jowell): Homoeopathic medicines marketed in the United Kingdom must either have a registration certificate under the homoeopathic registration scheme or a marketing authorisation issued by the licensing authority.

Mr. Swayne: What will the hon. Lady do to ensure that the licensing system does not become an enormous economy of scale which will be used by large drug companies to exclude smaller firms which currently serve the market very well?

Ms Jowell: As the hon. Gentleman will be aware, the homeopathic medicine industry is regulated by European directive. There are some quite disturbing inconsistencies in the marketing requirements for products, depending on when they were licensed. Our concern is to ensure that no homeopathic product is marketed in such a way that unproven medicinal claims are inadvertently made about its effectiveness that would be misleading to the public.

Mr. Alan Simpson: I am grateful for the Minister's supplementary answer. Does she accept that it is absurd that, if I buy arnica for my football bruising from a company that has the original product licence of right from the 1960s, the packaging tells me that the product is for bruising, whereas the packaging of arnica produced by a newer company cannot tell me that? Is it possible for the United Kingdom to seek a dispensation simply to allow companies to be able to offer the same information about homeopathic products?

Ms Jowell: My hon. Friend makes an important point. The European directive provides for member states to take action in relation to efficacy of products. Only France has so far drawn up guidelines, but, given the growing public interest in homeopathic medicine and complementary medicine more generally, I shall certainly want to study the issue closely.

Primary Care (Leicestershire)

Mr. Andrew Robathan: If he will make a statement on primary care in Leicestershire. [38673]

The Minister of State, Department of Health: In December, we published our White Paper "The New NHS", which sets out our proposals to develop a modern health service. In February, Leicestershire health authority issued a discussion document setting out the primary care locality arrangements in the county and suggested proposals for how those arrangements may evolve towards primary care groups.

Mr. Robathan: The Minister must be aware that the Government are underfunding the NHS in

Leicestershire—as compared with other areas—this year by about 3 per cent., or £13.4 million. In primary care, that is leading to disputes among general practitioners over scarce resources. As a direct result of the capitation-based approach to resource allocation, GP services in south Leicestershire will deteriorate. What would the Minister say to my constituents in Countesthorpe and elsewhere, where hospital waiting lists are higher this year than they were last, and where GP services are worsening owing to his Government's policies?

Mr. Milburn: Frankly, I am surprised that the hon. Gentleman has raised that issue. This morning, I inquired about the position with the health authority, and I can tell him that GPs in his area are set to gain from the changes, just as the health authority has gained today following my right hon. Friend's announcement of an extra £4.8 million to tackle waiting lists.

Mr. Barry Sheerman: Is not Leicestershire—like so many other parts of the country—doing extremely well under the new Government? Is it not important that Leicestershire and other health authorities should use the 50th anniversary year of the NHS not only to look back to their achievements but to look forward to what a dynamic and innovative health service can do for the citizens of Leicestershire—and do it better than ever before?

Mr. Milburn: My hon. Friend is absolutely right. We have a heaven-sent opportunity in this, the 50th anniversary year, to look to the future and to produce a modern and dependable health service which is properly resourced and engages all family doctors, community nurses and all staff in providing an excellent service day in, day out. That is a sentiment we ought to hear from Opposition as well as Labour Members.

Mr. Edward Gamier: May I cautiously invite the Minister not to spend too much time or Government money on celebrating the anniversary of the NHS, but to make sure that there is sufficient provision within it to assist those who need it? As we are talking about Leicestershire, will he assure me that the new dispensation under his glorious Government will provide sufficient funds for physiotherapy services for my constituency? We are satisfied with our GP provision—we have a number of excellent practices—but, in Harborough, we are short of physiotherapists. Will the Minister assure me on that matter?

Mr. Milburn: I am not sure whether the hon. and learned Gentleman has seen the light or not, but I will take his remark as a compliment. Physiotherapists, and therapists generally, provide an important service to the NHS. It is important to acknowledge that, in some parts of the country, there are problems in recruiting physiotherapists and occupational therapists. Unlike the previous Government. we will not sweep the problems under the carpet. We are doing what we can to tackle them—particularly by providing more training facilities and grants for those who want to take up that profession inside the NHS.

Walk-in GP Clinics

Mr. Paul Truswell: What plans he has to ensure the proper regulation of walk-in private GP clinics. [38674]

The Minister for Public Health (Ms Tessa Jowell): General practitioners involved in private clinics are subject to scrutiny by the General Medical Council in the same way as all other doctors.

Mr. Truswell: Did not the recent survey in Health Which? paint a particularly depressing picture of people paying between £36 and £250 to see a GP who did not know them from Adam; who had no access to their medical records; who was not trained to the exacting standards of the NHS; who was not subject to a proper complaints procedure; and who was not registered with the local health authority? Quite apart from those concerns, is this not one more chilling indictment of the previous Government's mentality, which gave rise to this form of taxi-rank medicine?

Ms Jowell: My hon. Friend is absolutely right. The account in Health Which? of prescribing by a number of independent walk-in health centres made disturbing reading. It is not in patients' interests—which are the single most important thing—to go to a GP who does not know them, or their medical history, or what they are being prescribed. That is why our efforts are going into building a modern and dependable health service which is led by quality, combining technical excellence with the responsive and flexible meeting of patients' needs. In pursuit of that, my hon. Friend will join me today in welcoming the allocation of £4.2 million to drive down waiting lists for his constituents, honouring a promise made by the Government at the time of the election a year ago.

Mrs. Marion Roe: Will private GPs be able to make secondary recommendations? What is the Minister's view of the relationship between private GPs and the NHS?

Ms Jowell: With great respect, I think that I have made the situation absolutely clear. Our concern is with the interests of patients. It is not in their interests to shop around and to go to several different GPs. They will receive the best care by going to a GP who knows them and whose services and care are supported by state-of-the-art medicine, delivering health care to patients where they need it.

Dr. Peter Brand: I am very disappointed that the Minister is ducking the question. Does she not agree that our experience with slimming clinics, some cosmetic surgery clinics, and now private walk-in clinics, is such that we need a regulatory mechanism that is more beefed up than that existing at present?

Ms Jowell: We do Keep any such development under close review, but the medical conduct of GPs who operate in those or other private clinic is a matter for the General Medical Council.

Specialist Services

Ms Sally Keeble: When he intends to issue consultation proposals to the NHS on commissioning specialist services. [38675]

The Parliamentary Under-Secretary of State for Health: The consultation proposals on commissioning specialist services were published on 8 April and issued to the national health service and to relevant professional and voluntary organisations. Copies are available in the Library. The document may also be viewed on the internet, on the NHS web page. Responses are requested by 1 June.

Ms Keeble: I welcome the statement. I am sure that the consultation can lead to substantial improvements in the quality of life in care for people with difficult conditions. Will the consultation also cover services that are needed by people with multiple sclerosis and motor neurone disease, who have very complex care needs, ranging from community to specialist, over a period? In my constituency, those needs are extremely well met at Favell house, which provides that seamless care from community to specialist medical treatment.

Mr. Boateng: The consultation is designed to cover precisely that sort of complex condition. MS is one of those conditions that is well served by the voluntary and charitable sector, which will no doubt respond to the consultation. We look forward to hearing what it has to say.

Mr. Owen Paterson: Royal Shrewsbury hospital provides world-renowned specialist services. There is a proposal for its amalgamation with the nearby Princess Royal hospital in Telford. Will the Minister guarantee that he will consult locally to ensure that those specialist services stay in Shrewsbury?

Mr. Boateng: The hon. Gentleman has been in the House long enough to know that consultation is very much a part of any proposal. Consultation will no doubt take place in the usual way, and, if it comes to Ministers, he will have an opportunity to make his views known.

Rev. Martin Smyth: Bearing in mind the fact that there is growing emphasis on devolution throughout the nation and that, at the same time, more specialist skills are needed for technical work in the health service, will the Minister give an undertaking that specialist services that serve the whole nation will be available?

Mr. Boateng: We work closely with colleagues in the Northern Ireland Office, and the hon. Gentleman can be sure that what we propose in this instance will apply throughout the nation. Of course that will include Northern Ireland.

New Deal

Mr. Jonathan Shaw: What proposals he has for extending the new deal to the NHS. [38676]

The Minister of State, Department of Health: I wrote to health authority and NHS trust chairmen on 11 March, in a joint letter with my right hon. Friend the Minister for Employment, Welfare to Work and Disability Rights, about the benefits of the new deal, encouraging them to support the Government's welfare-to-work programmes. The NHS executive will shortly issue further guidance to NHS employers.

Mr. Shaw: Given that the NHS is the largest employer in the UK, is it not sensible that it plays a part in the Government's new deal initiative? Furthermore, does my hon. Friend agree that the new deal provides a golden opportunity, given the concern about the shortage of nurses, for NHS trusts to attract back nurses who perhaps have been prevented by family commitments from going back to work in hospitals?

Mr. Milburn: My hon. Friend is absolutely right. The NHS is in a position both to contribute to and to gain from the new deal. I am pleased to tell him that, when I visited Newcastle yesterday, I learned that the NHS in Tyne and Wear is already considering making available 100 health care jobs through the new deal. I expect that to be followed in other areas.

National Survey

Mr. Derek Twigg: When the first national survey of patients and user experience will be carried out in the NHS. [38677]

Mr. Dennis Turner: When the first national survey of patients and user experience will be carried out in the NHS. [38685]

The Secretary of State for Health: The first national survey of the experience of NHS patients, users and carers will be carried out later this year.

Mr. Twigg: Is not the best way of getting patients and staff more involved in an organisation to give them a voice in it? Is it not especially important, given the massive injection of resources that the Government have put into the health service recently, to give people that say and ensure that the money is spent correctly? North Cheshire has already been allocated £6 million for 1998–99, with an extra £1.9 million to reduce waiting lists, which was described by the chief executive of North Cheshire health authority as
a huge sum of money".

Mr. Dobson: I certainly welcome any such statements. We certainly need to listen to the people who work in the national health service, which is why I made it my business recently to write to every single person working in the service to ask for comments on the service generally and on local matters.
We are also determined to carry out straightforward surveys of the experience of patients, users and carers; that has never been done before, and it will be the first example of a Government listening to what the people who use the service have to say. Up to now, any assessment has depended on odd random surveys or

anecdotal evidence; some of that may be perfectly valid, but we want to find out systematically what people think about the services that they are getting.

Mr. Turner: Is this not an excellent and fitting way in which to celebrate the 50th anniversary of our national health service, created by a Labour Government? Will not a new, dependable, modernised health service be created by this new Labour Government to take us into the next 50 years?

Mr. Dobson: I endorse everything that my hon. Friend has said. It is always worth repeating for the record that the Tory party voted against the establishment of the national health service. People need reminding of that from time to time.
A genuine survey of patient opinion will confirm what polls conducted by the commercial pollsters show: if asked what they think about the national health service generally, people say that it is pretty good; but if asked about the service that they and their family got, they think that it is brilliant. It is necessary to emphasise the extent to which people who use the national health service are satisfied with the treatment that they receive.

Mr. Simon Hughes: After the rough ride that the Secretary of State got at the Royal College of Nursing congress last week—

Mr. Milburn: Were you there?

Mr. Hughes: No, but I was there the next day.
Does the Secretary of State agree that we do not need a national survey of user and patient experience to confirm that, a year on from Labour's general election victory, community hospitals are closing or threatened with closure; a quarter of trusts and authorities project deficits; there are more than 10,000 vacancies in the NHS; and waiting lists are up 100,000 instead of down 100,000? Is the right hon. Gentleman telling us that that is saving the NHS? Is not the truth that, a year on, the NHS is far from safe in the Labour Government's hands?

Mr. Dobson: All I can say in response to the hon. Gentleman's usual whingeing, moaning contribution is that the figures announced today show that the health authorities serving seats represented by Liberal Democrat Members are getting an extra £73 million to help to deal with waiting lists. People—I refer not to constituents but to the whingeing, moaning Liberal Members of Parliament who purport to represent them—should show some gratitude.

Dr. Julian Lewis: Will the survey of user experience include women raped on mixed wards in acute psychiatric units? Will the Minister explain why new units with mixed wards are still being built in London, despite the opposition of a range of mental health charities? Is it not disgraceful that last Friday the Government again blocked the Mental Health (Amendment) (No. 2) Bill, which would prevent users unfortunate enough to go into an acute psychiatric unit from having such horrifying experiences?

Mr. Dobson: It is news to me if new mixed wards are being opened. If they are, I will put a stop to it.

Audrey Wise: I welcome my right hon. Friend's last remarks, and the national survey. Does he


none the less agree that, although such national surveys are extremely useful and welcome, they cannot replace certain pilot schemes that enable deeper evaluation to be made of some treatments? Does he accept that a number of such schemes have been conducted in maternity services? Will he make sure that, having received good evaluation, including favourable responses from users, health authorities and trusts will listen to the results of those evaluations?

Mr. Dobson: What we propose is intended to supplement the current evaluations and pilot schemes. The object of the exercise—pilot schemes and evaluations as well as the national survey of opinion—is simply to identify the things that are right and ought to be encouraged and the things that are wrong and should be discouraged, and in that way to improve the performance of the health service. That is what everyone in the country wants, and all the 1 million people working in the health service want.

GP Prescription Budgets

Miss Anne McIntosh: If he will make a statement on the financial provision for GP prescription budgets. [38678]

The Minister of State, Department of Health: Nearly £4.4 billion has been allocated to health authorities in England to cover the cost of drugs and medicines prescribed by general practitioners this year.

Miss McIntosh: Does the Minister agree with some practitioners that setting cash limits on prescription budgets will detract from their freedom to act in the best interests of their patients and in accordance with their best clinical judgment? Does he agree that it could lead to a loss of morale, especially in the GP profession; might harm recruitment; and might prevent the best relations between doctor and patient from being established? Does he accept that it should be for the GPs to prescribe what is best for their patients?

Mr. Milburn: The answers to the hon. Lady's questions are no, no, and yes. Yes, of course it is for the family doctor to decide what is in the best interests of the individual patient, but I did not hear any howls of protest from Conservative Members when the previous Government cash-limited drug spending for 50 per cent. of GPs by introducing the GP fundholding scheme. There were no protests then, so why the protests now?

Mr. Barry Jones: Has my hon. Friend guaranteed the clinical judgment of general practitioners?

Mr. Milburn: Yes. As my hon. Friend is aware, we have put family doctors and community nurses in the driving seat. We have removed the artificial barriers between prescribing budgets and referral budgets which, in the past, have got in the way of allowing the family doctor to make the right decision for the patient. We have done no more and no less than increase GP freedom.

Mr. John Maples: It was good to hear the Secretary of State say that survey after survey

showed how happy people were with the NHS. He was clearly referring to the British social attitudes survey. There has not been one since the election, so presumably he was referring to people's happiness with the health service when it was being run by us.
I should like to bring the Minister back to the question of GPs' budgets. Under fundholding there was a trade-off for fundholders between prescribing and referrals to secondary care. GPs were limited in a much wider budget and in a great many cases they overran it and the money was made available to them by their health authorities. Under the new primary care groups, that will not be the case, will it? Suddenly, the vast majority of GPs believe that there will be a separate cash-limited prescribing budget within the group's overall budget. That is one of the reasons why so many of them are showing, in survey after survey, their misgivings about the new proposals.

Mr. Milburn: On his first point, I remind the hon. Gentleman of what he said in Birmingham recently about the previous Government's record on the national health service. He said that they had failed and that the British people had given their judgment on that. Let us be clear about the facts.
Secondly, the hon. Gentleman referred to GPs' prescribing budgets. I say to him, to the House and to GPs throughout the country that no GP will run out of cash, that patients will be guaranteed the drugs and the treatment that they need, and that, if a primary care group overspends, the overspend will be catered for within the health authority's general allocation.

Miss Melanie Johnson: Can my hon. Friend confirm the excellent comments made by my right hon. Friend the Secretary of State for Health at an Association of the British Pharmaceutical Industry event last Thursday evening? He made a well-received speech, in which he rightly said that we would ensure that money spent on pharmaceuticals and on drugs was used most effectively. His concern was not about budgets, but about effective treatment for patients.

Mr. Milburn: My hon. Friend is absolutely right. The new system that we shall introduce will allow the individual family doctor to decide what is best for the individual patient, without there being any artificial barriers in the way. That may mean that there will be an increase in drugs spending in some GP practices; elsewhere, it may mean an increase in referral patterns to hospital. The key fact is that, in future, decisions will be taken in the best interest of the patient.

Dentistry (South-West)

Mr. David Heath: How many applications from the south-west of England have been approved under the investing in dentistry initiative. [38681]

The Minister of State, Department of Health: Since the investing in dentistry initiative was announced last September, my right hon. Friend the Secretary of State has approved 46 funding requests from the area covered by the south and west regional office of the national health service executive.

Mr. Heath: I thank the Minister for that reply and warmly welcome the initiative, if it provides wider access


to NHS dentistry. Will he continually audit the evenness of the spread of availability across the country, and ring-fence any moneys that are unspent from the allocation, and ensure that they are available for dentistry? Will he also ensure that my constituents, some of whom have rung me in desperation about finding a dentist within reasonable travelling distance who will provide NHS treatment, are satisfied that there is such provision in their area?

Mr. Milburn: We have received two investing in dentistry applications from the hon. Gentleman's constituency. Both have been approved. We have allocated an extra £50,000 as a consequence, and an extra 4,000 patients in his area will have access to NHS dental care as a result. We want the NHS dental service to be available across the country as part and parcel of a modern and dependable health service, not an add-on or an afterthought. That is why we are tackling access problems through investing in dentistry and through other initiatives. They are working well to date, and we shall continue to monitor to ensure that they work well in the future.

Mr. Peter L. Pike: Is it not a fact that, in the south-west and in the north-west, the Tory party—

Madam Speaker: Order. We are not concerned about the north-west. I was waiting for someone to widen the question, which is about applications from the south-west of England.

Mr. Pike: Is not it a fact that people in the south-west cannot get NHS dental treatment, and cannot move anywhere else in the country to get it, because the Tory party destroyed the dental service in the south-west and throughout the country?

Mr. Milburn: Throughout the south-west and in other parts of the country, we are taking action to tackle the availability problems that are a legacy of the previous Government's rundown of NHS dentistry. Through investing in dentistry, we are making NHS dental services available to an extra 250,000 people across the country who otherwise would not have access to them. That is a good start, but we want it to continue.

Waiting Lists

Dr. Vincent Cable: When he expects waiting lists will be reduced by 100,000 from the 1 May 1997 levels. [38682]

The Secretary of State for Health: As I made clear on 18 March, we are committed to reducing waiting lists to 100,000 below the record levels we inherited by the end of this Parliament.

Dr. Cable: I thank the Secretary of State for his reply. Can he give an assurance that, following the welcome additional money now being used to reduce waiting lists, there will be no further cases of the sort reported to us as constituency Members of Parliament, wherein clinicians have been leaned on by administrators to distort their medical priorities in order to treat politically more embarrassing 18-month waiting list cases?

Mr. Dobson: I would not have thought that any clinician worth his or her salt would allow themselves to

be leaned on. If they allowed their judgment to be clouded in that way, that was their fault and they must answer to their conscience, their profession and their patients.

Mr. Andrew Mackinlay: As part of the strategy to bring down hospital waiting lists, will the Secretary of State consider approaching the South Essex health authority and Basildon and Thurrock General Hospitals NHS trust to find out whether the spare capacity in wards at Orsett hospital can be used not only for my own area of Basildon and Thurrock, but for the wider regional need to reduce hospital waiting lists?

Mr. Dobson: I do not pretend to be an expert on every hospital in the country, and I am sure that those in charge in that area, having had it made clear to them by me that they are to get their waiting lists down, will take every sensible step to get them down. In this case, they will be assisted by the £3.8 million that is going into my hon. Friend's area, which takes the total extra money that we have put in to £18.5 million over and above what the Tories intended.

Mr. Patrick Nicholls: Does the right hon. Gentleman recall that, in its document "Labour's Early Pledges" and, indeed, in the general election manifesto, the Labour party promised immediate action to reduce waiting lists by 100,000? Is it not a fact that, 12 months on, waiting lists have actually increased by 100,000? Although no one doubts the sincerity of the right hon. Gentleman's commitment to the national health service, is not the truth of the matter that, in the general election campaign, the Labour party made promises about waiting lists that it knew it could not possibly keep, because it did not want political honesty to get in the way of a successful electoral outcome?
Would not the people of this country be better served if, instead of casual ad hoc sums being offered up as a fig leaf to spare the Secretary of State's embarrassment, the right hon. Gentleman came to the House today and pledged that the Government would ensure that their annual increases were at least as great as those of the previous Conservative Government? That would be an announcement worth hearing.

Mr. Dobson: Talking about casual promises, we could reasonably interpret the hon. Gentleman's remarks as a rejection by their elected representative of the £6 million extra that is going to the two health authorities serving his constituents. The casual ad hoc sums to which he refers are apparently of no consequence to the hon. Gentleman, but I am sure that many of my hon. Friends would welcome them being spent in their area. We are serious about getting waiting lists down. The people of this country are sick to death of waiting lists, year in, year out. It is not the fault of the people working in the health service, but the fault of successive Governments. We have to bring waiting lists down and we are going to bring them down.

Mr. Dennis Skinner: Instead of wasting too much time listening to hypocritical claptrap from the Tories—they had their chance and they blew it—will my right hon. Friend bear in mind that he probably has the biggest nut to crack in getting down waiting lists, and that £500 million was set aside for contingencies in the Budget


a few weeks ago? Will he consistently remind the Chancellor of the Exchequer that we need to keep the promise to get waiting lists down, and that it will need a lot of money? A lot rests on it, so let us make sure that we get our hands on all the cash available to do it.

Mr. Dobson: My hon. Friend knows that both he and I set a great deal of store by propriety. He knows that I have discussions with the Chancellor and the Prime Minister, and that it would be wrong for me to disclose their contents, but we have been successful in obtaining an extra £500 million to be spent on reducing waiting lists this year, and I expect that sufficient sums will be forthcoming to reduce them by 100,000 or more before the end of this Parliament.
I remind those Conservative Members who seem to think that their stewardship of the national health service was popular of the statement made by the hon. Member for Stratford-on-Avon (Mr. Maples), now the principal Tory spokesman on the health service, who, as recently as 22 September 1997, said:

"We had a very clear policy on the health service up until May 1. It was rejected by the electorate."

Primary Care Groups

Mr. Andrew Lansley: When he next expects to meet the Royal College of General Practitioners to discuss the structure of primary care groups; and if he will make a statement. [38684]

The Minister of State, Department of Health: We have regular meetings with general practitioners and other primary health care representative bodies, including the Royal College of General Practitioners. The development of primary care groups is just one among a number of issues that we have discussed. These professional bodies are supportive of the Government's plans to develop a modern and dependable national health service.

Mr. Lansley: Will the Minister confirm that it has emerged from meetings with those professional representative bodies that the problems of recruitment and retention of general practitioners are severe and growing? To meet those needs, will he therefore extend to general practitioners the commitment that the Secretary of State gave to the nursing profession—that the Government do not propose to stage future pay awards?

Mr. Milburn: As the hon. Gentleman is aware, there are problems with the recruitment and retention of GPs in some parts of the country. As he is also aware, the Doctors and Dentists Review Body recommended to the Government—and we have accepted the recommendation—that an extra £60 million be found to tackle some of those problems in the course of the next year or so. We shall discuss those recommendations with the professional organisations, including the British Medical Association, and no doubt target those resources to tackle the hard core of recruitment and retention problems that are encountered in some parts of the country.

Mr. Kevin Barron: When the Minister consults the Royal College of General Practitioners,

will he remind its members that the formation of primary health care groups that include people who work in and for the national service and those who are contracted to it will not only improve health care, but prevent ill health? Everyone who is concerned about ill health in this country should join in welcoming that.

Mr. Milburn: My hon. Friend is absolutely right. Throughout the country, family doctors and community nurses are enthusiastically embracing the idea of primary care groups, for two good reasons. First, it puts them in the driving seat in shaping hospital services and other local health services, and gives them far more leverage, influence and power than they have ever had. Secondly, the primary care groups go with the grain of the more recent developments in the NHS, where family doctors are coming together and overcoming the divisions of the past—especially the sole legacy of the previous Government to the national health service. The previous Government left the GP community split down the middle between fundholders and non-fundholders, but that is being brought to an end, because we want those in the NHS, including those in primary care, to work together as one.

NHS Accountability

Mr. Bob Russell: What plans he has to increase public accountability in the NHS. [38686]

The Secretary of State for Health: Since we took over, we have opened trust board meetings to the public, and removed the gagging clauses on staff. We have appointed people more representative of the communities that they serve. For example, more than half the appointments are of women, and we have doubled the proportion of black and Asian representatives.

Mr. Russell: Does the Minister agree that a strong body of opinion in the Labour party would like some democracy to be introduced to the people's national health service? May I suggest that we should do away with quangos? I invite the Minister to consider the three trusts in my constituency, plus the area health authority, in which all four chairmen are Conservatives, two of whom have been rejected by the electorate. Is it not the case that the present Government are just providing retirement jobs for defeated Conservatives?

Mr. Dobson: On the hon. Gentleman's last point, I do not think that that has been the main burden of the Conservative attack on the people whom I have appointed. I thought the point was—I may have missed it slightly, but I do not think so—that I was heaving out too many Tory deadheads. However, I may be wrong. The hon. Gentleman appears to think that he is an expert on the internal affairs of the Labour party.

Mr. Dennis Skinner: He is a retread.

Mr. Dobson: I understand that the hon. Gentleman was once a member of the Labour party, and he remains an expert on it. However, I assure him that there is no substantial body of opinion within the Labour party seeking a wholesale change to the national health service. Labour Members want to see that service working.


When it comes to elected representatives, I do not think that there is a council in this country comprising 50 per cent. women members or 9 per cent. black and Asian members. Those percentages certainly apply to my appointments to the national health service.

Mr. Paul Flynn: What can members of the public do when they suspect that their relatives are being over-prescribed neuroleptic drugs in residential homes? There is a wealth of evidence to suggest that anti-psychotic drugs are being administered to make the homes easier to run rather than to benefit the patients. Will the Secretary of State aim to reduce costs and damage to patients in the health service by avoiding the over-prescription of not only neuroleptic drugs, but antibiotics?

Mr. Dobson: We must aim to ensure that the right people are prescribed the right drugs in the right amounts at the right times so that there is no over or under-prescribing, or people getting no prescriptions at all. That is our target. As to people in one institution or another being treated badly, the fact that we have opened trust board meetings to the public and removed the gagging clauses on staff should provide substantial new protections.

Mr. John Wilkinson: Does the Secretary of State believe that he increased public accountability by announcing yesterday to a private NHS meeting his plans to create a single health authority for London, which will take over the role of the North Thames and South Thames NHS executives? How did that increase public accountability? Should not the Secretary of State have done us the courtesy of making that announcement to the House of Commons? Ought he not to have borne in mind the implications that the announcement would have for NHS trust hospitals, such as Mount Vernon in my constituency, which straddles the Greater London boundary? Furthermore, what is the future of the home county areas that are currently administered by those two executives?

Mr. Dobson: If my announcement yesterday to a private meeting was a secret, it was one of the worst-kept secrets in the national health service. Sir Leslie Turnberg proposed a London-wide health region in his review, which we published. It was endorsed in the Government's written response to that review, which we also published and which I introduced with a statement in the House. I went no further than saying that we should get on with it a bit more quickly than we intended originally.
There will obviously be certain problems with the boundaries, and we shall look at them carefully. From the point of view of the health care of Londoners, having a London-wide health region that will take London-wide strategic decisions is better than having two bodies that serve the south and the north of the Thames—and which are notoriously very bad at liaising with each other—taking those decisions.

Mr. Ken Purchase: Does the Secretary of State accept that accountability goes further than appointing people to positions in the NHS? It includes NHS systems that people understand readily. Will the Secretary of State encourage health authorities

and trusts to adopt the standards of the King's Fund and the equivalent of International Standard Organisation 9000—which, incidentally, the authority in my constituency has just been awarded? Will the Secretary of State take on board my comments, and congratulate my authority on taking that action?

Mr. Dobson: I am happy to congratulate the Wolverhampton authority. Like many others in the west midlands, it is innovatory and dedicated to looking after local people better. The previous Government changed the arrangements in the NHS for consultation and for complaints. For good or ill, those procedures should stay in place for a while for us to see how well they work, rather than our deciding to rip them up without examining the evidence. We want far more genuine consultation in future.
Of all the changes that we are making to the NHS, the most far-reaching is perhaps the proposal that each health authority should in future be required to draw up a health improvement programme for its area, identifying what is wrong and presenting proposals to put it right, and that that should be done in consultation with local authorities, voluntary organisations, staff, professional bodies and local businesses. When all have signed up to it, they should buckle down and put those programmes into action.

Mr. Julian Brazier: In light of the fact that community health councils are publicly accountable in a way that district health authorities are not, will the Secretary of State take particular note of the views of Canterbury and Thanet community health council if, as appears likely, it refers to him East Kent health authority's dreadful proposals to close the Kent and Canterbury hospital? Following his answer to my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson), will the Secretary of State confirm that there is no danger of East Kent suddenly moving regions, in the middle of an already fraught consultation?

Mr. Dobson: East Kent is fairly likely to stay where it is. I know about the history of the Goodwin lands becoming the Goodwin sands, but Kent is probably fairly safe for the immediate future.
If the community health council objects to the proposals affecting the hon. Gentleman's constituency, that decision will come to me, as he well knows. It will be my responsibility to decide what happens. The hon. Gentleman is not a churlish Member, generally speaking, so I would have hoped that he would welcome the £3.6 million extra that we provided for his area to reduce the waiting lists, whatever the hospitals.

NHS Staff (Consultation)

Mr. Vernon Coaker: What action he proposes to improve consultation with staff within the NHS. [38687]

The Parliamentary Under-Secretary of State for Health: We have made clear our commitment to involve national health service staff in decisions about how the NHS is run. We have set up a task force to identify and explore new approaches to staff involvement, and my right hon. Friend the Secretary of


State has written to every individual working in the NHS, seeking his or hser views on examples of what has or has not been shown to work in practice.

Mr. Coaker: Does my hon. Friend agree that consultation with staff in the NHS is vital if we are to rebuild the NHS and get the NHS that we want? With reference to the task force that the Government have set up to consult staff, is it not significant that it includes not only senior managers and doctors, but porters, so that the forgotten army of the NHS is represented and can express an opinion on the future development of the NHS?

Mr. Boateng: We have made clear our intention that the 13-strong panel that has been set up as the task force should include porters, nurses, doctors, managers, a national union officer and representatives from outside the industry, all of whom are making a valuable contribution to the work of the task force. It is a matter of recognising the skills that exist in the NHS and using them.

Mr. Edward Leigh: When the Minister next consults NHS staff, what estimate will he give of the size of waiting lists this time next year?

Mr. Boateng: We need no lessons from Conservative Members about consulting NHS staff. As they know, we see NHS staff as our greatest asset—one that they wasted when they had the opportunity to use it.

Ms Diane Abbott: Will the Minister ensure that in consulting NHS staff, some attention is paid to finding out their views and opinions on issues affecting black and ethnic minorities? After the second world war, women of Afro-Caribbean descent played an important role in building up the NHS. In my view, their contribution has never been sufficiently recognised.

Mr. Boateng: My hon. Friend has shown considerable commitment to ensuring that the contribution of Afro-Caribbean and Asian men and women to the NHS is recognised, and we shall celebrate it in the course of this 50th anniversary year. I was pleased to have the opportunity of visiting, with my hon. Friend, a hospital in her constituency, showing that the Government consult all

staff and recognise the manifold contribution of all those who, over the years, have built the NHS into something we should be proud of and something that Labour Members are determined to protect.

NHS Bureaucracy

15. Mr. John Bercow: If he will make a statement on his plans for releasing £s1 billion from NHS bureaucracy; and when he expects this target to be met. [38688]

The Minister of State, Department of Health: The Government have already taken action to reduce bureaucracy in the national health service. By the end of this year, £240 million that would otherwise have been spent on bureaucracy will be released for patient care. Building on that, the White Paper "The New NHS" sets out a programme of action to release £1 billion from bureaucracy by the end of this Parliament.

Mr. Bercow: I am grateful to the Minister for that reply. How does he square his rhetoric about cutting bureaucracy in the health service with the intention in the White Paper to create a national institute of clinical excellence, a commission for health improvement, a primary care group, an advisory committee on resource allocation and a capital prioritisation advisory group? What is his estimate of the likely annual cost to the national health service of the flotilla of pen pushers that he proposes to create?

Mr. Milburn: I know that the hon. Gentleman has a reputation as a zealot for all things Conservative, but I would have thought that even he would have drawn the line at protecting and defending bureaucracy at the expense of patients. We want to establish a national institute for clinical excellence and a commission for health improvement to improve the quality of services to patients. I hoped that that would command support not only from Labour Members, but across the House. I can tell the hon. Gentleman that we intend to release £1 billion by cutting the number of commissioning bodies from around 4,000 to as few as 500, and by ending extra-contractual referrals, the annual contracting round and the absurd system of individual invoicing introduced by the Conservative Government.

Points of Order

Mr. Andrew Robathan: On a point of order, Madam Speaker. I know that the Minister of State, the hon. Member for Darlington (Mr. Milburn), would not wish to be misunderstood or in any way to mislead the House. I respect that, but he said in response to my question that general practitioners in my area were happy with the settlement that they had received. I should like to assure him and you, Madam Speaker, that they are very unhappy.

Madam Speaker: That is not a point of order, but an abuse of a point of order. The hon. Gentleman should not be making that point to me as Speaker. I have no control over such matters.

Ann Clwyd: On a point of order, Madam Speaker. You will be as disturbed as the rest of us by the pictures on television of dead and dying children in the Sudan. Because of the considerable concern of our constituents, may we expect a ministerial statement on the matter in the next few days so that we can find out in detail what action the United Kingdom Government are taking to alleviate those terrible problems?

Madam Speaker: I have not been informed that the Government are seeking to make a statement. I have noticed what appears on television, and the hon. Lady has made her point. I believe that I am right in saying that tomorrow we have questions to the Department for International Development. I have not yet looked at the questions, but they may provide some opportunity for Ministers to be questioned on the matter.

Mr. Nick Gibb: On a point of order, Madam Speaker. During yesterday's debate on amendment No. 2 to clause 30 of the Finance (No. 2) Bill, I was informed—

Madam Speaker: Order. I am sorry, but the situation arose in Committee when I was not in the Chair; therefore, it was not my responsibility. If the hon. Gentleman approaches the Chair when the House is in Committee, he may be able to seek some help.

Town and Country Planning (Amendment)

Mr. Elfyn Llwyd: I beg to move,
That leave be given to bring in a Bill to amend the law with respect to town and country planning.
It is vital that planning legislation is reviewed periodically to reflect the various changes in society, which may be socio-economic, cultural or demographic in nature. Some aspects of the law relating to town and country planning are in dire and urgent need of reform, and that is why I seek leave to present the Bill.
One aspect which needs to be addressed is the situation whereby planning permissions granted 25 or 30 years ago remain valid despite nothing but the merest effort to develop being made by the holder of the planning permission. Under the Town and Country Planning Act 1990, a development must usually be begun within five years of the granting of permission or within two years of the final approval of any reserved matter.
The moot point, and that which concerns me, is when a development is said to have begun. Sweet and Maxwell's "Encyclopaedia of Planning" refers to that and says that a developer can comply by doing
any work of construction in the course of erection of a building"—
that is a wide latitude—or even
any operation in the course of laying out or constructing a road or part of a road, for example, marking out the line … with pegs.
Therefore, a developer can simply mark out the line of an estate road, which may or may not be developed in the future, with a few wooden pegs, and that constitutes development within the Act, keeping the planning permission extant.
Planning authorities are not using existing powers to place time limits on developments; that causes considerable damage to many communities and brings the system into disrepute. Take, for example, the village of Aberdyfi in my constituency, an old, small seaside village steeped in maritime history.
In the late 1960s, a developer was granted planning permission for more than 200 houses on Copper hill above the village. There was no local need for them then and there is no local need for them now. The fact that those permissions have been in existence for more than 30 years without a single plot having been built on persuades me that there never was a local need for them. The developer is in effect treating them as his pension policy bonanza, and the mere fact of a peg having been hammered into the ground here and there keeps his speculative investment alive.
Quite apart from the fact that many people question whether such speculation is consistent with land policy and forward planning, some fundamental and far-reaching problems are being visited on Aberdyfi and, I am sure, many other constituencies.
When those plots are developed, they will kill off Aberdyfi as a village, a village that we all know and love. Its charm and immense character will dissipate overnight. Such a situation is a block to the sensitive and sustainable development that planning law and procedure should nurture. I say that because, in my experience, whenever


an application by a small-scale developer in south Meirionnydd is turned down, one of the reasons which always crops up is that there are already X number of planning permissions for building plots in the locality. The vast bulk of those would, of course, be the permissions on Copper Hill street in Aberdyfi. That is a classic catch-22 situation. We have heard a lot of Joseph Heller recently, and this exemplifies that. One can argue that such a development not only is harmful per se, but is hampering the proper and sensitive development of an area.
Furthermore, it is settled law that a planning permission, once commenced, cannot be abandoned by a non-user. My Bill seeks to deal with that matter. There would, as at present, be an initial five-year term in which to undertake a development, but if the developer has done nothing, or has simply complied with section 56 of the 1990 Act, they would have to reapply after five years to the planning authority, which will examine the application on its merits, question the delay in fully developing, and then issue a fresh permission strictly limited in time. If the development is not fully completed within that time scale, the permission should expire. That would ensure that there is better control of local authority planning policy and it should prevent a recurrence of the Aberdyfi example.
I further pray in aid a speech reported in Hansard on 4 April 1968, when the then Minister of State said:
there is no bar to renewal of the permission. I accept that cases will arise when, for perfectly good reasons outside his control, the owner will not have been able to start his development within the expected time. It may be due to a falling off of demand in the area … it may be due to difficulties over capital, although if that is so, it does not necessarily follow that he should get an extension, for it may be that he ought to convey the land to somebody who is able to develop it—if it is land which ought, according to proper planning needs, to be brought forward earlier for development"— [Official Report, Standing Committee G, 4 April 1968; c. 956.]
That could almost be part of today's script. Unfortunately, that declaration of intent was not followed in practice.
The Campaign for the Protection of Rural Wales fully supports the Bill. The second main change which I seek would assist many communities throughout Wales, Scotland, Ireland and England, which are in difficulty because villages are dying. They have lost local amenities and basic services such as the local school, the post office, the village shop and the garage. That problem was recognised by the House recently when we legislated to allow rate relief for rural retailers. That is a welcome move, but further steps must be taken.
A factor which undoubtedly exacerbates the problems is the preponderance of second homes and holiday dwellings. They are socially divisive and are empty for most of the year: hence they are of no benefit to the community. They do not assist the viability of village retailers, because their occupants are there for only a few weeks or months of the year.
Such properties also bring certain social problems: the usual scenario is that they are purchased by those who can, by definition, afford a second home, which often means that they are earning many more times the average salary of those in the local community. They are able to pay the asking price without quibble, and locals are left in the wake wondering when, if ever, they will be able to enter the property market and buy a house in the community in which, often, they were born and brought up.
There are villages in Kent, Somerset, Cumbria and all over the UK where that problem is evident, but in Wales it has an added dimension because it directly dilutes the indigenous culture and language, which is a great source of concern to all who hold them dear.
My answer would be a register of second homes in every rural community, and a limit on such homes of 10 per cent. of the available housing stock. That would be possible through an amendment to the use classes order, so that, when a full-time residential property is intended to become a second or seasonal dwelling, it shall require planning permission.
As I recall, the problem and that solution were canvassed by the Select Committee on Welsh Affairs in its report on rural housing three and a half years ago. I repeat the call for that solution, which is a straightforward, honest and open approach. A prospective purchaser would know whether a community had reached 10 per cent. of its quota because he or she would obtain information from the local authority, and that would be that. Villages can thrive and sustain themselves only if part-occupancy is limited. It is tragic to see villages where only half a dozen local families live year round.
Finally, in true Welsh Methodist minister mode, I come to the third head of my sermon. I consider that a neighbour whose strong views are given to a planning authority should have a third-party right of appeal in the planning process where there is a prima facie case for that. The wheat can be separated from the chaff by making it necessary to have leave to apply in each case. I know that that works perfectly well in many other jurisdictions—for example, in Ireland. I hope that it can be introduced within the United Kingdom jurisdiction.
Those three matters have concerned me for some time and I have viewed them both as a lawyer in the field and as a Member of the House. I therefore commend the Bill to the House and trust that it will receive the support that it deserves.

Question put and agreed to.

Bill ordered to be brought in by Mr. Elfyn Llwyd, Mr. Dafydd Wigley, Mr. Ieuan Wyn Jones and Mr. Cynog Dafis.

TOWN AND COUNTRY PLANNING (AMENDMENT)

Mr. Elfyn Llwyd accordingly presented a Bill to amend the law with respect to town and country planning: And the same was read the First time; and ordered to be read a Second time on Friday 3 July, and to be printed [Bill 180].

Orders of the Day — Finance (No. 2) Bill

(Clauses 1, 7, 10, 11, 25, 27, 30, 75, 119, and 147)

Considered in Committee [Progress, 27 April].

[MR. MICHAEL J. MARTIN in the Chair]

Clause 1

RATE OF DUTY ON BEER

Question proposed, That the clause stand part of the Bill.

Mr. Nick Gibb: On a point of order, Mr. Martin. During yesterday's debate on clause 30 and discussion on amendment No. 2, a Labour Member said that the statutory instruments relating to clause 30 were available and asked whether I had seen a copy. I had not, and I raised the matter as a point of order at the end of the debate on clause 30 because no copies of those statutory instruments had been deposited in the Library yesterday; nor were they available in the Vote Office.
The Paymaster General responded later by saying:
We have checked what happened—they were placed in Derby Gate, in the House of Commons Library and in the House of Lords Library. We are not sure why they were not there when he looked for them".
The Paymaster General went on:
I reassure him that we have arranged for additional copies to be deposited—no doubt he will be able to collect them after the Division."—[Official Report, 27 April 1998; Vol. 311, c. 109.]
I was not able to collect the draft regulations after the Division, and I was not able to collect them this morning. I have just been to the Library and they are still not there, and they have not been deposited in the Vote Office.
This is contempt not only of this Committee and the House, but of the wider public who are waiting to see the contents of the regulations before they are debated. The documents should have been available before yesterday's debate, and they are not even available now.

The First Deputy Chairman of Ways and Means: (Mr. Michael J. Martin): That point of order relates not to the business before us, but to past business. However, the Minister will have heard the hon. Gentleman's remarks and will no doubt find ways to rectify the matter.

The Financial Secretary to the Treasury (Dawn Primarolo): May I deal with the point of order first? The hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) raised a point of order yesterday, and it was explained to the Committee that copies of the draft regulations were placed in Derby Gate, which is where they are, and in the House of Lords Library—they are there also. Four copies were deposited in the House of Commons Library at 3.30 pm on Friday.
I cannot explain why all the copies went missing from the House of Commons Library, but they were deposited, and the Government are not treating the House with contempt. Extra copies have been placed in the Library. I apologise to the hon. Gentleman for the difficulties that

he is experiencing with the Library in respect of these draft regulations. I shall ensure that we find out exactly why this has happened, as the hon. Gentleman should be given an explanation.
Draft regulations are slightly different in that they have no reference number and hon. Members must ask correctly for the specific item. However, the draft regulations are there for scrutiny. If the hon. Gentleman was so desperate, he could have gone to Derby Gate, as the documents are certainly there as well—[Interruption.]

The First Deputy Chairman: Order. Hon. Members should not intervene. An explanation has been given, so we must now get on with the business before us.

Dawn Primarolo: Clause 1 will increase the rate of duty on beer in line with inflation from 1 January 1999. The rate will increase from £11.14 to £11.50 per hectolitre per cent. of alcohol in the beer. The change does not represent a increase in real terms, but is needed to maintain revenue. Between January 1994 and January 1998, beer duty fell by 6 per cent. in real terms, and it is now at its lowest level in real terms for 15 years. The increase will prevent a further erosion of revenue in real terms.
Several hon. Members are keen to speak in the debate. I shall listen carefully, and reply to any specific points.

Mr. David Heathcoat-Amory: Today's debates will generally be about items that make life a little bit more enjoyable—not just beer, but tobacco and gambling. However, the Government seem to regard those items less as a source of pleasure than as a source of revenue. In a savagely tax-raising Budget and Finance Bill, the Chancellor could not resist raising almost all such indirect taxes by the maximum amount that he thought he could get away with.
I must declare an interest in beer, as I am a member of the parliamentary beer club, which has a distinguished patron—Madam Speaker. Perhaps you, too, are a member, Mr. Martin? I am delighted that you are. It is the biggest, or best attended, of all parliamentary clubs, so there is a great deal of expertise about beer—and, perhaps, considerable alarm about the increase in duty. We accept that it is not a real-terms increase, but it will nevertheless be damaging, for reasons that I shall outline.
The background to this nominal increase is a worsening of smuggling and excise fraud, persistent problems that I do not claim have arisen over the past year or two. The origins of smuggling lie far back in time, when, for various reasons, the United Kingdom had a structure of excise duties that were comparatively high against those of our continental neighbours, which relied on raising equivalent revenues by other means.
Whatever the reason, there is a substantial gap between the rate of tax on beer, and most other alcoholic duties in this country, and the rates prevailing on the continent, particularly in France and Belgium. That encourages people to go over to those countries to do their shopping—quite legitimately. There is some entirely legitimate cross-border shopping, and an increasing problem of smuggling and excise fraud. The two are linked, but distinct, phenomena.
The previous Government moved to ameliorate the problem. The substance of our charge is that the present Government, through not just this year's but last year's Budget, are making it worse. That is why we have tabled amendments intended to delete the increase.
The single European market creates, in effect, an open border. The legitimate trade, in Calais typically, but also in other continental shopping centres where people buy large quantities of drink—and tobacco, which we shall debate later—has created a huge retailing business in France. We are not just talking about retailing, however. Shoppers going abroad often buy drinks—beer, in this instance—that are not manufactured in this country. Those people are responding to a market signal. The Labour party, which now believes in market economics, cannot be terribly surprised when people respond to cheaper prices and lower duty rates on the continent. The United Kingdom beer tax is 32p in the pound whereas in France the equivalent rate is 5p, and that difference drives the huge and increasing habit of cross-border shopping.
There are two solutions. We can restrict the amount that people can bring into this country, which is not possible under the rules of the single market, which we support, or we can reduce the high rate of duty. That cannot be done quickly or easily and it does not need to be done completely. No one suggests that duty rates should be standardised, but somehow the clear incentives must be tackled.

Mr. Ross Cranston: If the amendment is carried, how will the revenue gap be filled? The real value of beer duty is lower than for 15 years, partly as a result of the single market.

Mr. Heathcoat-Amory: In debates on the Finance Bill last year, the hon. Gentleman gained the reputation of making helpful interventions, and that one is no exception. I shall explain exactly why the Government can afford not to increase duty this year, contrary to the situation that we faced in government.
The hon. Gentleman will recall that, in the previous Parliament, the Conservative Government faced a persistently high —in some ways, alarmingly high—budget deficit. Nevertheless, we managed to freeze alcohol duty, and in our last two years in government we cut the duty on spirits. This Government face a different situation. The rates of duty are to come into effect on 1 January 1999, and in the financial year on which we have embarked the Government envisage a large budget surplus.
The comment by the hon. Member for Dudley, North (Mr. Cranston) about the low proportion of duty ignores the fact that there is still a gap between continental and United Kingdom duties, and that that is driving the phenomenon of massive cross-border shopping and the smuggling and other illegalities on which I shall shortly enlarge. There is a problem, and it is no defence to say that the proportion of duty on a pint of beer is lower than it was before. If the hon. Gentleman thinks that there is not a problem, he should talk to publicans and owners of off-licences in his constituency, who I think will tell a different story.
We attempted to tackle the problem. We froze the duty and, over time, that would have led to erosion of the differential. The Government have increased duty in

nominal terms, not just in the Bill but in last year's Budget. They are making a bad situation worse. There is a gulf which, if anything, is widening. Matters have got worse not just because of the Government's failure to pursue our policy of freezing duties but because of the strength of the pound, which is a potent element in the equation. A strong pound makes it even cheaper to buy drink in Calais and elsewhere. I could speak at length about the Government's responsibility for that, but perhaps that it is a topic for another debate. That problem, plus the duty differential, is creating a crisis.
I have spoken about cross-border shopping. The second major element is illegality, which hits legitimate trade in all our constituencies and means that often alcohol is sold in an uncontrolled way, perhaps to those under the legal drinking age. It has also contributed to the demise of the British pub. I do not want to over-emphasise that. I have been in politics too long to accept all lobbying comments at face value. Beer drinking is experiencing a secular decline, which cannot be attributed solely to the habit of buying drink abroad or from illegal sources. Marginal pubs, which are nevertheless socially important, are shutting. One reason is that they are undermined by illegal trade.
4 pm
An estimated 1.4 million pints of beer are brought across the channel every day. That amount is thought to be increasing. I cannot be certain about that, because the Government have not produced recent figures, despite promising to conduct a study.
That leads me to another Labour broken promise. This is quite a startling one, because it comes from the top—from the Prime Minister. He wrote in The Licensee, the main trade magazine, on 1 May 1997—a significant date—that the Government should
initiate an urgent independent and comprehensive study, analysing the extent and effects of both smuggling and illegal cross channel shopping".
He also said:
We are not going back on a single promise, not a single promise.
Well, he broke that one. He has not set up an urgent, independent and comprehensive study. Instead, a Customs and Excise study was announced in the pre-Budget report last November. That report is not available to the Committee.
I asked the Financial Secretary to publish the report. I received a written reply on 25 March that did not answer the question. She simply said:
The Government will be taking action to clamp down on smuggling and fraud and … will announce their Proposals for doing this as part of the outcome of the Comprehensive Spending Review."—[Official Report, 25 March 1998: Vol. 309, c. 202.]
She said that nothing would be published before then. She did not say whether the study by Customs and Excise would be published and, if not, why not.
The Government have published a slightly hilarious document called "Your Right to Know". It was produced by the Chancellor of the Duchy of Lancaster and prefaced by the Prime Minister, setting out all sorts of wonderful ways in which the public—and presumably the House of Commons—would be better informed. In his introduction, the Chancellor of the Duchy of Lancaster says:
Openness is fundamental to the political health of a modern state.
He also says:
It is a new balance with the scales now weighted decisively in favour of openness.
The Prime Minister talks disparagingly about the traditional culture of secrecy and how all that will be broken down by giving people the legal right to know. Of course, that was all just waffle.

Mr. Cranston: rose—

Mr. Heathcoat-Amory: I am sure that the hon. Gentleman wants to be helpful again.

Mr. Cranston: I thank the right hon. Gentleman for giving way yet again. I should like to be helpful. Will he support the freedom of information legislation?

The First Deputy Chairman: Order. We shall not go as far as to debate any freedom of information legislation that might be brought before the House. We shall stick to the clause.

Mr. Heathcoat-Amory: I shall obey you, Mr. Martin. I should love to give the hon. Member for Dudley, North his answer. When we see the Bill, I shall tell him whether we will support it.
The Government have published an expensive glossy saying that we all have a right to know. It is obvious that we have a right to know only what the Government think that we ought to know. Although the smuggling and illegality in the smoking and drinks trade are important matters that concern the Committee, we clearly have no right to know the conclusions of the Customs and Excise review.
That would not matter if the Prime Minister had kept his promise and initiated that
urgent, independent and comprehensive study",
which would not be conducted by Customs and Excise because, although it is a splendid department, it is part of the Government. This is a particularly stark example of a promise being broken by the Prime Minister that is very much to the detriment of the House. It will impoverish our debate on this important subject.
I return to the amendment before us. The point which I wish to leave with the Committee is that, although we recognised in government that there was no quick fix in this respect, we nevertheless recognised, in freezing duty on beer, that the gap between duties had eventually to be closed. As an interim measure, when I was doing this job in the Treasury, I committed additional resources to tackling smuggling and illegality on the ground. That was never going to be a substitute for tackling the causes of crimes.
When in opposition, the Prime Minister used to talk about tackling not just crime but the causes of crime. As the great economist Adam Smith first pointed out, smuggling is largely a crime induced by the Government. If they establish through the taxation system a clear incentive to smuggle, they can hardly be surprised that people take advantage of it. The only solution is gradually

to move in the direction of continental rates of duty. As a very large budget surplus looms, this Finance Bill is a very good opportunity to make such a move.
I know that one or two of my hon. Friends wish to contribute to the debate, so I simply urge the Committee to support the amendment.

The First Deputy Chairman: Order. Perhaps the right hon. Gentleman is mistaken; there is no amendment before the Committee. He was speaking to clause stand part.

Mr. Heathcoat-Amory: I apologise, Mr. Martin, although the effect will be the same if we vote against clause stand part.

Miss Anne McIntosh: I hope that my comments will be helpful to the Government but will support the remarks of my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory).
I am concerned about the problems of bootlegging—otherwise known more politely as smuggling—which are not addressed in clause 1. The differentials between duty paid in this country and in other European Union member states invite people to smuggle on an increasingly large scale. The worry for the Financial Secretary to the Treasury must be that the loss of revenue to the Treasury is as high as it is. From the figures that I have, I believe that revenue to the Treasury would increase if rates of duty went down and volume of sales in this country correspondingly went up. In addition, the costs of the increased number of Customs and Excise agents used to apprehend suspected smugglers would be saved. I know that we are still waiting for proposals.

Dawn Primarolo: So that I do not misunderstand the hon. Lady's point, will she say whether the economic model to which she is referring is the Oxford model commissioned by the Brewers and Licensed Retailers Association? Knowing that will help me in my response.

Miss McIntosh: I might need to do some more research, but from work which I did earlier, I understand that the loss of revenue to the Treasury is £978 million—regardless of the cost of the agents whom the Government are minded to introduce to apprehend smugglers.
I am also concerned that, at this quite late stage of the British presidency of the Council of Ministers, the Government are so far not using their office to act to remove the distortion of trade and competition caused by divergence between rates of excise duty in different member states. I understand that the Financial Secretary or her colleagues could instruct the Commission to prepare a report that the Council could discuss. Without that instruction, the Council is open to a charge of neglect of duty, because it is obliged to report every two years on the distortions to competition and trade caused by the differentials in duty.
The rates of duty paid in the UK distort the market in drinks—particularly wines, beers and spirits—between the UK and other European Union countries. I understand that Customs and Excise admits that, if it is lucky, it catches only 5 per cent. of suspected smugglers. There is a huge loss to the Revenue in terms of excise duty, but


there is also a large cost to the Treasury of employing existing Customs and Excise agents and any future agents yet to be appointed.
It seems odd that the approach of the Government discriminates against home-produced wines, beers and spirits. I regret the fact that clause 1 refers only to the problem of wines. I wish to give an example from this year's statistics on Scotch whisky. The excise duty on a 70 cl bottle of Scotch whisky—which costs £10.70—is £5.48. The VAT is £1.59, making a total tax of £7.07—66 per cent. of the cost of the bottle. That means that Scotch whisky is taxed more heavily than any other alcoholic drink—particularly with regard to alcoholic volume.

The First Deputy Chairman: Order. Perhaps I may remind the hon. Lady that we are dealing with beer duties. Perhaps she could talk about them, because there are problems there as well.

Miss McIntosh: I am most grateful for your guidance, Mr. Martin, but the point which I am trying to make is that clause 1 should address excise duty charged on the alcohol content of each alcoholic drink. I am against clause 1 because it fails to do so. The duty charged on beer, wines and spirits is higher in the UK than the duty charged on any other European Union-produced products in their own country. The Government are directly discriminating against our own products in their home market, so I cannot support clause 1.

Mr. Edward Davey: All of us would want to claim some expertise in this area. As a new Member of Parliament, find the temptation to list all the wonderful pubs and publicans in my constituency almost too great to resist. However, I am sure that you would intervene, Mr. Martin, and call me to order should I do so.
I want to address the main point of principle. The issue for any Government setting excise duties for beer—and other alcohol or tobacco products—is to try to strike a balance between the need to raise revenue, the need to ensure that health and social issues are properly dealt with, the need to support the strength and well-being of the industry, and the need to prevent too great incentives for smuggling.
The Government have got it right in the Bill. There is a very modest increase nominally—which is not an increase at all in real terms—and a very small amount of revenue is being raised. On balance, the Government have got the different factors right.
There are concerns on the health and social side which can be tackled in a number of ways, one of which is price. If we saw a significant reduction in alcohol duties—which seemed to be the implication of the proposals from the right hon. Member for Wells (Mr. Heathcoat-Amory)— there would be worrying side effects in terms of alcohol consumption, particularly by young people. We need to bear that in mind. However, there are other ways in which to pursue those health and social objectives. I hope that the Government will examine them.
In my short time as Member of Parliament for Kingston and Surbiton, I have noticed some problems in the licensing laws. This matter does relate to the clause, Mr. Martin, because it is one alternative to seeking higher increases in duty. In Surbiton, a rash of new pubs has

opened. The local authority, magistrates and local police have opposed the granting of the licences. The Government inspector, sitting in Bristol, far away from Surbiton high street—[Interruption.] The Financial Secretary to the Treasury seems to be concerned. This is not an anti-Bristol, but an anti-licensing regime, point.
As the Government inspector was in Bristol, clearly he had no idea of the impact on the local community of that significant increase in a short period in the number of pubs in Surbiton' s high street. Elected representatives in Surbiton were well aware of that impact and, working with police and magistrates, wanted to reduce the significant increase in licensed premises because of its bad social side effects.
4.15 pm
The Government do have other powers open to them, should they wish to use them. I urge them to examine the licensing regime, to give local representatives and local magistrates working with the local police more powers to intervene, and to ensure that those powers cannot be overridden by a faraway, unaccountable Government inspector, who does not know the local position and cannot react quickly to it.
Smuggling is the other issue that the Government have to balance in deciding what the duty should be. We have heard much about that, and I am sure that we will hear more from right hon. and hon. Members who are yet to speak, but the question that we have to debate is whether the current duty level has caused the alleged increase in smuggling, whether there are other causes and, most important, whether a significant reduction in alcohol and tobacco excise duties would lead to an increase in revenue.
That has been the contention of some hon. Members, particularly those who spoke on Second Reading. They would need to show two factors before they could defend their case: first, that there was mass evasion, to the effect that revenues were seriously undermined, and therefore that a reduction in duties would make good those revenues; and, secondly, that attempts to persuade European Union partners to level up duties had been completely exhausted. Indeed, there is a third factor: they would need to show that there were no alternative measures that Her Majesty's Treasury could implement to tackle smuggling, such as reorganisation of Customs and Excise.
For this debate, I have considered the evidence produced in parliamentary answers from the Financial Secretary and in other papers available to hon. Members. It is clear that the estimate of the amount of revenue that has been evaded by cross-border shopping and lost because of smuggling is very small. Indeed, the estimate seems to be much smaller than that of the losses from evasion of other taxes. Government estimates for 1997 show that, in total, £165 million was evaded and that £120 million was lost. Those figures were reached by using new estimating procedures, which are run jointly with the industries in Great Britain, so the figures are not disputed by them.

Mrs. Jacqui Lait: I am interested in those figures, which are the lowest that have been produced for a long time. Where did the Treasury get them?

Mr. Davey: The House of Commons Library took them directly from estimates published by Customs and Excise,


based on surveys and estimates made jointly with the industry. If the hon. Lady disputes the figures, I am more than happy to hear what she has to say.
Beer duties represent about 3 per cent. of the total revenues from excise duties, which is a very low figure. Those who want to slash the duties must provide more convincing figures, which I do not believe are available.
For the benefit of France and other European Union member states, the Government should try to persuade them to level up their duties. That would also have an effect.

Mr. Heathcoat-Amory: Dream on.

Mr. Davey: The right hon. Gentleman may be sceptical, but I still think that that avenue is worth pursuing. Perhaps, with the much warmer relations that the Government claim to have with our European partners, they will have more success than their predecessors.

Mr. Nicholas Soames: Where does the hon. Gentleman propose raising the revenue shortfall that would accrue from the transaction?

Mr. Davey: I do not believe that there would be a revenue shortfall from what I am proposing. My proposal was that France should raise the duties on beer.

Mr. Soames: It will not.

Mr. Davey: The hon. Gentleman may say that it will not, but it is for this Government to see whether they can be more successful than the Conservative Government. We have yet to find out.
I read with interest the Alcohol Concern report "Who Creates the Bootleggers' Profits?". Before the industry can lobby effectively for significant reductions in alcohol duties, it will have to answer some of the points that are well set out in that research paper. Alcohol Concern research conducted this March comparing the different prices charged in supermarkets and off-licences in Dover and Calais showed that there was a 21p price difference on a unit of alcohol for beer, of which 9p could be put down to differences in duty, but of which 12p apparently related to differences between the industries in France and in Britain.
The difference is partly explained by the way in which beer is sold in Calais, where there is a "pile it high, sell it cheap to the day trippers" mentality. It would be possible for enterprising people in this country to pile it high and sell it cheap in a warehouse in Dover. They would not have the 9p price incentive to add to the 12p differential that is caused by our industry's inefficiencies, but there is still a margin that they could arbitrage away. The industry still has a case to prove.
That does not mean that the Liberal Democrats do not take smuggling seriously. It is illegal and has bad effects, because unscrupulous individuals who break one law are likely to break others by selling alcohol to minors and engaging in other dangerous activities.
Rather than merely cutting duty, which is a simplistic approach and may not be effective, the Government should consider changes in Customs and Excise. In a press release in September last year, the Economic Secretary talked about some of the extra resources that she had allocated to Customs in Dover. That was welcome, as there are clearly problems in Dover, including a lack of space to expand the facilities, which is a logistical problem which I hope Customs and Excise management can address. I hope that, when the results of the comprehensive spending review come out, we can go much further.
I am not an expert in the managerial structure and operational routines of Customs and Excise, but from first principles, one imagines that Customs and Excise has a tradition in history of operating purely out of the ports—coastal ports and airports—and that its organisational structure has been biased towards tackling smuggling at the ports. That is probably a different culture from that which exists on the continent. Our partners on the continent have long land borders and they are much more used to exercising anti-smuggling measures inland. I suggest to the Financial Secretary that there may well be some benefit in seeing whether Customs and Excise can redirect some of its efforts to tackling smuggling inland. I hope that it does that in any case, but the extra marginal investment in its services may be best directed to internal controls.
For all the reasons outlined, I feel that what is before us in clause 1 is a modest increase. The problems that need to be tackled in setting alcohol duties—health and social problems, and smuggling—can be tackled in other ways. Therefore, Liberal Members will support the Government if the Committee divides.

Mr. Archie Norman: I, too, want to talk about beer duty but, before doing so, I remind members of the Committee that I have an interest in the matter as chairman of a supermarket group responsible for a large proportion of the legitimate beer sales in this country. The issue at hand is not the interests of large supermarkets or, for that matter, large brewers. It is very much a question of the little guy, the small independent retailer, the small pub and the small brewer. It is a question of the British pint—part of the British way of life—and the price of that pint to ordinary working people.
We are looking not only at an excessive tax on the daily fare of ordinary working people but at a broken promise. My right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) quoted the Prime Minister. I have another quote from the Prime Minister. In May 1997, he wrote:
Labour accepts that there is a problem and that the Government should act urgently to strengthen Customs and Excise, tackle the illicit sale of contraband, stand up for UK consumers, jobs and businesses when rates of duty are considered by the European Council and initiate an urgent independent and comprehensive study".
As my right hon. Friend said, the study may have been initiated, but we have not seen much by way of the outcome. I hope that the Financial Secretary will tell us exactly when she expects the study to be published. Perhaps she would be kind enough to give us some insight into its content. There is widespread suspicion in the industry that the content is unhelpful to the Government's case, and that that is why it has not been disclosed.
The fact is that it is a bad tax. The motivation for the tax is entirely driven by revenue income. That, in and of itself, is not a sufficient reason for taxing a specific good or product. The tax is exploitative, selective and there for the wrong reasons.
The Financial Secretary has already made a minor announcement about strengthening the fines and the actions that can be taken against offenders in instances of smuggling. That announcement is welcome, but it tackles only the tip of the iceberg. The fact is that the sheer profitability of smuggling has increased enormously in the past year as a consequence of the increase in beer duty and the increase in the value of the pound. It has become a large-scale industry for organised crime, and is also profitable for the little guy and the small-time smuggler.
The impact has now gone beyond a level that is sustainable. That is the issue. The question is not whether there should be duty but what is a sustainable long-term level of duty. The hon. Member for Kingston and Surbiton (Mr. Davey) has already mentioned the estimates for loss of revenue. My estimates, published by the Government, are rather different from his, and I know that some of my hon. Friends have different estimates again. However, as I recall, including duty-paid imports, the Treasury is losing half a billion pounds of duty and VAT revenue every year, according to its own figures. I believe that the figures from HM Customs and Excise show a visible loss of £300 million. I shall be corrected by my colleagues if that is not right.

Mr. Edward Davey: Are those the total figures for alcohol and tobacco? The figures that I quoted related to beer, with which the clause deals.

Mr. Norman: The hon. Gentleman may correct me, but I understand that the total figure for alcohol and tobacco—£960 million—is greater. We are talking about rough estimates; it is not possible to estimate the true loss as a result of contraband sales, because the only reasonable way to do so is to estimate the amount of smuggling. I am advised by my friends in the brewing industry that the best way to do that, is to count the white Transit vans coming off the channel ferries, which would be an inexact science.

Dawn Primarolo: If that is the most effective way to assess the amount of smuggling, why did not the previous Government do that, and why did they not agree with the trade's figures?

Mr. Norman: The Financial Secretary makes the important point that the profitability of smuggling has increased enormously in the past year. The actions of the Government in respect of macro-economic policy, the level of the pound and the increase of duty have greatly worsened the impact on the industry. She is a member of the Government, and it is up to her to explain to hon. Members how to count and measure the loss to the Revenue before assuming that it is not great.

Mr. Derek Twigg: Can the hon. Gentleman tell us how the previous Tory Government helped the situation by cutting severely the number of customs officers?

Mr. Norman: The hon. Gentleman knows that the previous Government intended to freeze duty on beer and reduced duty on spirits—there was an attempt to tackle the problem. No one is saying that it could be resolved

easily because it is complex, but it has gone beyond a sustainable level and a judgment must be made about what level is sustainable.
Various economic models, such as the Oxford one, have been mentioned. The Financial Secretary, if we might have her attention for a second, has explained that, in her judgment, that model does not prove that there would be material short-term loss of revenue as a result of the increase in duty, but this is not a short-term problem—it is a long-term problem that is growing rapidly.
As so often in Government dealings with business, the long-term effects are widely misunderstood. They are: decline in investment in the United Kingdom brewing industry, especially among small brewers; decline in the number of pubs and therefore in the capacity to sell British beer at full-paid duty; reduced availability of full-paid duty beer in this country; and changed drinking habits, because the switch in price and value means that it is cheaper to import foreign beer. A lot of contraband beer is foreign, which is tipping the scales against the British industry.

Mr. Cranston: Can the hon. Gentleman explain why the previous Government increased the rate on beer in 1995 after they lost the VAT on fuel decision? Does the logic of his argument favour a uniform European Union duty on beer?

Mr. Norman: The best response to the hon. Gentleman's latter point is to acknowledge that, as long ago as 1992, the members of the EU agreed that alcohol taxation across the EU should move towards the reference rate of 8p a pint. Labour Members keep referring to the previous Government, but the problem has been exacerbated greatly in the past 24 months by the increase in the value of the pound and by the increase in beer duty—it has gone beyond a sustainable level.

Mr. Christopher Leslie: To clarify that point, will the hon. Gentleman cite, with chapter and verse, the source of his information on developments over the past few months?

Mr. Norman: My information comes from real life: I have talked to brewers and pub owners; I have listened to what the Government and the hon. Member for Dudley, North (Mr. Cranston) have said, and quoted it back to them. I have also looked at the Oxford economic model and other economic models—something that I strongly commend to the hon. Member for Shipley (Mr. Leslie), because, if he read them, he would become better informed on the subject.
The subject is easy enough to discuss in the ivory tower of the House of Commons, but in the pubs and off-licences and on the streets of Britain, it is affecting ordinary working people and their way of life. I recommend that Labour Members leave their economic models and get to grips with the people outside who are attempting to buy the ordinary British pint for an honest price. [Interruption.]

Mr. Andrew Robathan: Is it not strange that Labour Members laugh when they hear that my hon. Friend gets information from real life, instead of from the smoke-filled rooms of Labour party politics?

Mr. Norman: It is not strange at all, because the facts of real life are often inconvenient to those in government, as the Labour party is now discovering.
The other salient fact to bear in mind is that ours is the only European Union country that suffers on such a substantial scale from the problem of smuggling and contraband. The reasons for that are: the disparity in duty is great; enforcement has been ineffective in the past; and the logistics of bringing product across the channel are far easier to handle than they would be in, say, Ireland, where the levels of duty are also extremely high.

Mr. Derek Twigg: Can the hon. Gentleman quote figures on smuggling in other European nations, given that they are so different from UK figures?

Mr. Norman: The hon. Gentleman will know that we discussed earlier the fact that reliable published statistics are not readily available; however, that there is a problem is well known. The hon. Gentleman may wish to discuss the issue with representatives from the Irish brewing industry.
Any brewer in the country will say that the industry is under attack because of the growing volume of imports resulting from the escalation in the value of the pound and the effect of increased smuggling and contraband. That is not a small effect, even though Labour Members think it trivial and the hon. Member for Kingston and Surbiton tries to explain that it does not cost the Treasury much. It is estimated that 15 per cent. of all the beer sold in the off-licence trade in Kent is contraband, and that that volume is growing at approximately 15 per cent. a year; compounded, that figure will double in five years.
When looking at economic models, what we have to worry about is not what happens today, but what will happen if the trend continues. In her response, the Financial Secretary might like to tell us not only whether the Government are prepared to reconsider the most recent increase in duty, but what their intentions are in respect of further increases in duty in years to come.

Mr. Barry Gardiner: Given that, at 30 per cent., the percentage of the price of a pint of beer that is taken in tax is now lower than at any time in the past 30 years, does the hon. Gentleman agree that the explanation for the rise in smuggling—which is a major problem that we all recognise—must therefore be attributed to some other cause than the duty on beer?

Mr. Norman: No, I do not agree with that. As a shopkeeper, I must advise the hon. Gentleman that he cannot bank percentages; what he can bank is pound notes. It does not matter what the percentage is: if the pound note profit is higher per Transit van-load of contraband, the exercise is more profitable. The costs have not risen greatly, but the benefits have increased considerably. As I said, it is estimated that the benefits are to the tune of £600 per white Transit van coming off a cross-channel ferry.
The profits have risen considerably over the past year, as they have done over the past five years. The problem is now out of hand and is having a long-term corrosive effect on a British industry that is worth protecting because it is part of the British way of life. In a sense, smuggling has also become part of the British way of life: it has become what is popularly called yellow-line crime and is widely participated in.
The number of people employed and engaged in crime as a result of the duty is great, and smuggling has become semi-legitimised in some communities and certain sections of British culture. It is contributing, on a widespread basis, to the growth in under-age drinking, because, inevitably, small retailers who knowingly sell these goods are also prepared to sell to those who are under age. Labour Members have confirmed that they are worried about that issue.
Contraband goods are now so widespread on the street—I assure the Committee that it is the case in any retail community, especially around Christmas—that small shopkeepers, to be price-competitive on beer sales, often feel that they must handle contraband. Many of those small businesses—in the north, in Scotland, in Liverpool, in the Manchester conurbation or in Yorkshire—are already under pressure to survive, and to keep themselves going and keep themselves price-competitive they must handle contraband. The level of duty is effectively pushing people into a form of yellow-line crime.

Mr. Cranston: Is the hon. Gentleman making the accusation that many small shopkeepers in this country are handling contraband?

Mr. Norman: The hon. Gentleman makes a very good point for me; welcome to the problem. Anyone who has been out on the street buying alcohol in the run-up to Christmas, dealing with small shopkeepers, talking to people in the industry about where the product comes from, knows that that is the case. Shopkeepers are obliged to take that route to stay in business. Because up to 15 per cent. of alcohol sold in the Christmas period comes in through contraband sources, if those shopkeepers did not do so, they would no longer be price-competitive. It is a very seriou's problem on the street but, if the hon. Gentleman recognises it, perhaps we are at last starting to get to grips with it.
Smuggling is becoming large-scale crime. It is acknowledged by Customs and Excise that the organisation of smuggling is now a large-scale business, which is contributing revenue and profits to the coffers of people who otherwise handle drugs and other more serious products. The profitability of large-scale crime is being fuelled by very high duty and a failure to enforce the Customs and Excise provisions.

Mr. Edward Davey: I am delighted to hear the hon. Gentleman say that. I am glad that we are getting to grips with the issue. Will he tell us his proposals and by how much he wants to slash duty?

Mr. Norman: I thank the hon. Gentleman for his question, but I am coming to that point shortly and I shall address it in a moment.
I do not want to leave this point without telling the Committee that I know, having worked in the industry and spoken to people who handle the product, that this is a widespread, well-known situation throughout the wholesale and retail industries. Moreover, figures for the growth—or lack of growth—in sales of British product show that supply is being eroded by competition from foreign imports, which cannot be sufficiently accounted for by legitimate imports.
It is well known, and I know from our experience, that, in the run-up to Christmas, it is possible to buy, at very low prices, not white Transit van-loads but lorry-loads of contraband—spirits as well as beer. Whisky may be bought for £5 a bottle. It is an extremely serious problem, not to be taken lightly, and has a widespread effect on the structure of the industry and the nature of price competition.
Among the side effects of the problem are that competition in the beer industry is geared to price, and that people are investing less money in the quality and diversity of British beer. It has a corrosive effect, not just on society and on pubs and off-licence outlets, but on the nature of the products that the industry invests in.
It is also well known that a large proportion of contraband never leaves the country. That can happen only when the crime is widespread and highly organised. The estimated figures on white Transit vans take into account only what is known to come back into the country. What never goes out does not come back in and cannot be counted, and there are no reliable estimates, but wholesalers and retailers throughout the country know that the scale of the problem is now so great that it is obvious to anyone with their feet on the ground who deals with the industry that a significant proportion of the product now never leaves the country. We are dealing with widespread fraud, which requires a far firmer response than greater fines for white Transit vans and proposals to confiscate vehicles, because vehicles that never left the country and never came back in cannot be confiscated.
This is not an issue of whether duty should be levied. It is an issue of the level of duty that is sustainable, not in the short term—not just for the Oxford economic model—but in the long term. It is a question of whether we should support the industry. Should we support the British pub, especially the little guy—the independent? Should we support the small brewer? Should we support the small retailer? The big retailers can handle anything; we can compete despite the problem. It is the little guy who is penalised by excessive Government interference, regulation and taxation, and the little guy is being penalised by this increase in duty.
It is not just a question of fighting fire with fire—of fighting excessive duty with excessive regulation and excessive penalties. It is a question of recognising when the tax has gone far enough. Enough is enough. This is a bad tax. It has gone too far. It is not working, and the increase should be reversed.

Mr. Soames: I shall be brief. I congratulate my hon. Friend the Member for Tunbridge Wells (Mr. Norman) on his excellent speech. I was shocked by the incontinent and wanton levity that some Labour Members showed toward what is not only a serious commercial problem but becoming, as my hon. Friend rightly said, a moral hazard.
It ill becomes the House of Commons, which has always been a gathering from every part of the land, from every interest and from every position of life, if its Committee does not listen carefully to someone who has run, with tremendous success, one of the biggest retailers in the country and who has a great and profound understanding, not only of the consumer's requirements and wishes, but of the difficulties that arise in putting

together a pattern of legislation that enables us to have a fair system. I whole-heartedly congratulate my hon. Friend on his admirable presentation.
The interests of the much smaller brewers are often trampled, especially in the House and by the Labour party. I speak from experience of my part of the south of England, which my hon. Friend the Member for Tunbridge Wells knows well and which the Financial Secretary also knows very well, because she is the distinguished alumnette of an excellent school in my former constituency and well knows the two breweries in the south of England, King and Barnes in Horsham and Harvey's of Lewes. Both breweries have seriously suffered as a result of the increase in smuggling.
We definitely support any steps that the Financial Secretary is taking to be tougher on this issue. I acknowledge the fact that she is building on the achievements of my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), the former Paymaster General, who was responsible for those matters, who, in a letter to my hon. Friend the Member for Vale of York (Miss McIntosh) last year, wrote of the steps that customs has taken
to further imp rove the rate of detection
at ports.
These include a programme of enhanced training, improvements to intelligence systems, increased staffing levels … together with redeployment elsewhere to reflect more accurately the degree of risk in each area.
Without a shadow of doubt, the implementation of clause 1 will increase the amount of contraband smuggled into the country. The Financial Secretary knows that that is the case. It is pointless for Labour Back Benchers to talk about what the Conservatives did when we were in power; disappointingly, we are no longer in power. No doubt, when we were in power, we made many mistakes, but a Labour Government are now in power, and it is for them to resolve this tricky problem.
I shall make two or three respectful suggestions to the hon. Lady. First, the proper policing of the problem depends upon an increase in the amount of intelligence presented to Customs and Excise. My constituency used to comprise Gatwick Airport, and I know the work of Customs and Excise extremely well. I have immense respect for it: it is a remarkable uniform service whose officers do a very good job. Much customs work is based on intelligence, which is assessed and used wisely.
In this country, we have some of the best intelligence services in the world, and it might be worth while attempting to make available to Customs and Excise more intelligence facilities that will enable it to penetrate some of the large rings that are smuggling beer into Britain. My hon. Friend the Member for Tunbridge Wells was absolutely right: not just private individuals in white Transit vans, but gangs and vast organisations are involved in bringing in contraband, to the great disadvantage of companies such as the two brewers in the south of England that I mentioned.
That should be a matter of grave concern to the Government. We must not allow smuggling to become a way of life that is accepted as custom and practice. People should not think that smuggling the odd load in a Transit van is fair game. It is not; it is breaking the law, and it must be dealt with using the full rigour of the law. The Government cannot be allowed to say, "It is all very


difficult because we do not have enough customs people or the facilities to do it, and only the smaller retailers are damaged, so we don't have to worry about it."
I hope that the hon. Lady will pass on to Customs and Excise my admiration for the number of detections that it has made in the course of the year. However, much more illegal contraband is getting through than Customs and Excise can detect. We must do more. I suggest that more intelligence work should be done to penetrate those gangs. I know that Customs and Excise does a great deal of work in that area, but I should like to see more.
Secondly, I should like to see more customs officers deployed at Dover. It is not good enough for the Government to defend their deployment policies by claiming that they must maintain a balance between the various threats and risks to this country and to our integrity. The fact is that Dover is clearly under-resourced as far as Customs and Excise is concerned—even though I know that more people have been employed in that area.
As I said at the beginning of my speech, I welcome any measures—this is not a party political matter—that the Government may take to pursue this crime. However, they should not believe that they can brush the matter aside lightly. My right hon. Friend the Member for Wells was correct to suggest that duty should be frozen, because that would hold the duty imbalance at a lower level. Parliament should deplore and vigorously oppose anything that encourages the wanton increase of smuggling into this country. If it is not deplored by the House of Commons, where else will it be so deplored?
I whole-heartedly support the views expressed by my right hon. and hon. Friends. I hope that the Financial Secretary will consider extremely seriously the knowledgeable and expert speech by my hon. Friend the Member for Tunbridge Wells.

Mrs. Lait: Like my hon. Friend the Member for Mid-Sussex (Mr. Soames), I congratulate my hon. Friend the Member for Tunbridge Wells (Mr. Norman) on an excellent speech, which rehearsed all the issues in great detail and to great effect. He spoke with enormous authority. I also endorse the stand taken by my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) in opposing clause stand part.
I am known for supporting a reduction in duty as the only sensible solution to this problem. It was with shock that I noted the levity on the Government Benches when my hon. Friend the Member for Tunbridge Wells outlined some practical solutions to the problem. During debate last week on the Finance Bill, suggestions that the problem could be solved by reducing duty were also treated with levity.
I hate to remind the Financial Secretary of her words—which I fear will return to haunt her—in the debate on the Finance Bill on 23 January 1995, but she said:
Beer smuggling is an enormous threat to the industry. It is a relatively new trade, if I may call it that, and we cannot estimate the extent to which the gradual build-up in the past 18 months has led to the undermining of the industry. The problems that are visible now are a fraction of the problems that will confront us in a few years' time if action is not taken."—[Official Report, 23 January 1995; Vol. 253. c. 64.]
I venture to suggest that that time is up, and that the Treasury is facing a problem that will not be solved by introducing further prevention measures.
I share the admiration expressed by my hon. Friend the Member for Mid-Sussex for the job that is done by Customs and Excise and by the police. Using the tightest of resources, they are doing a first-class job and, as far as they are able, prosecuting the larger cases. However, we must recognise that, when a person is apprehended and charged, customs and police become involved in the paper chase associated with prosecution. That immediately prevents those officers from doing other proactive work. The more criminals the customs and police prosecute, the fewer new smugglers they will be able to catch, because they are already tied up in the court process.
My right hon. Friend the Member for Wells argued that a reduction in duty is the only solution to the problem. While there is a big duty difference, putting more officers on the front line will halt only temporarily the increase in bootlegging and smuggling. As long as there is profit in it, people will smuggle and bootleg. The Government must reduce or remove that profit through a national strategy.

Dawn Primarolo: Will the hon. Lady explain to the Committee how much further she would take the logic of her argument? If people persistently flaunt the law, rather than enforcing the criminal justice system, does she advocate legalising their actions?

Mrs. Lait: I have no wish to legalise their actions. I contend that the Treasury has created a problem because of the duty differentials. We should reduce duty levels until smuggling and bootlegging stops.
That brings me to the most interesting point to which the hon. Member for Kingston and Surbiton (Mr. Davey) referred. The hon. Gentleman cited revised figures for the amounts of duty evaded, to which he claimed that customs and the industries have agreed. On 23 April, I received a document from the Tobacco Alliance—I may return to it when we discuss tobacco— confirming figures that I had already seen. It stated that Customs and Excise has estimated that £950 million in duty is evaded. If I understood the hon. Member for Kingston and Surbiton correctly, he reduced that figure—I am afraid that I did not catch the details, as my jaw dropped because I was so aghast—to £124 million. I got the impression from the hon. Lady's body language that she agreed with that figure.
If duty evasion is so low, why are so many people involved in smuggling? As my hon. Friend the Member for Mid-Sussex said, gangs are controlling smuggling operations—it is not just the mules in the white vans. The police suspect that some terrorist gangs are involved in the trade as well. The Treasury seems to condone that level of involvement in the trade. The Financial Secretary clearly disagrees with me; I suggest that she speaks to the Home Office, the Metropolitan police and the police specifically tasked with the job.

Dawn Primarolo: Will the hon. Lady explain to the House whether the £900 million figure that she quotes relates only to beer, to beer and all alcohol, or to all alcohol and all tobacco products?

Mrs. Lait: As I understand it, the figure represents the Customs and Excise estimate of all tobacco and alcohol products brought in through British sea ports. That leaves large holes. If one speaks to customs officers, as I have


done, they will say officially that it is a major underestimate. If one speaks to them unofficially, they will multiply it by a considerable factor.

Mr. Soames: Does my hon. Friend agree that, in exchanging estimates of the size of the problem, we are dancing on the head of a pin? I am sure that the Financial Secretary will give us the correct figure and disabuse us of our misapprehensions. Whatever the figure, we know that there is a huge gap. A huge sum is going out by way of lost duty and smuggling. It matters less what the figure is than what the Government intend to do to prevent an increase in such smuggling, in the light of the clause, which will merely lead to more smuggling.

5 pm

Mrs. Lait: I entirely agree. According to the Customs and Excise official figures, the loss equates to almost ½p on income tax or 0.5 per cent. on VAT. It is reprehensible for any Government to condone that level of tax loss.
I should therefore expect the rate of duty to come down in successive years, until the profit is taken out of smuggling. The people involved should no longer be considered to be acting illegally. Customs should be allowed to get on with the much more important job of stopping drug smuggling. There was some levity when I suggested last week that drug smuggling was more important than tobacco and alcohol smuggling, on the ground that tobacco and alcohol are also drugs. That might lead to an interesting debate, but we should be ruled out of order.

Mr. James Plaskitt: Does the hon. Lady not see the dangerous logic in her argument? She is in effect arguing that law breakers should be allowed to dictate the Government's fiscal policy.

Mrs. Lait: That is one of the problems that I have encountered since I first took up the issue, with my own Government and to an even greater extent with the current Government. Smuggling should not be a crime. It is a crime induced by the Government. The Government are responsible for solving the problem. It is not just a revenue issue. It is an issue of health policy and of the rule of law and its place in a civilised society.
While people are encouraged by our own Government to break the law, do hon. Members expect the police and customs to be respected by the rest of society? It is a mark of civilised society that the rule of law is respected. The rule of law clearly is not respected in this instance because of the sheer level of bootlegging and smuggling.

Mr. Cranston: I do not follow the logic of the hon. Lady's argument. The logic seems to be that the French Government are creating the problem, by imposing a lower duty. There will always be people who break the law. That does not necessarily lead to the conclusion that we should do away with the law. Would the hon. Lady suggest that we should legalise heroin, because some people break the law in that respect?

Mrs. Lait: It may have escaped the hon. Gentleman's notice that there is no duty on heroin.
For years our Government have had a high-tax policy on alcohol and tobacco. In a single market, that encourages smuggling. We have seen it in the past, in the 18th and 19th centuries. The only thing that reduced smuggling and bootlegging to sustainable proportions in the 18th and 19th centuries was the cutting of duty.
I am suggesting that we cut the duty year on year gradually, until the profit comes out. That will end the encouragement of under-age drinking. There is ample evidence of French lager being drunk throughout the country—it is not a south-east problem. The role of Customs and Excise and the police will be respected once again.
It remains a great sadness to me that Labour Members consider this a matter for hilarity.

Mr. Gardiner: The hon. Member for Beckenham (Mrs. Lait) said that the only solution to the problem was for duty to be cut year on year, and that that was the only effective way to stop smuggling. Forgive me, Mr. Martin, for drawing the Committee back to the amendment tabled by the Opposition. Far from suggesting that duty should be cut year on year to stop smuggling, it suggests that the Treasury should continue with the rate as set, but only one month after a report has been presented to Parliament to tackle cross-border smuggling. A great lacuna seems to be developing between the hon. Lady's argument and the clause that she purports to support.

Mr. Heathcoat-Amory: To spare the hon. Gentleman embarrassment, may I point out that that is not our amendment. If he glances at the amendment paper, he will see that the amendment is in the name of the Liberal Democrats.

Mr. Gardiner: I apologise to the hon. Lady. However, the force of her argument does not address the real issue. I shall focus on that. I agree with her and other Conservative Members who emphasised the problem that the smuggling of beer and other alcohol poses for retailers in the United Kingdom.
I know that my hon. Friend the Minister has recently given interviews to magazines such as Asian Trader, in which she discussed that problem and outlined the way in which the Government believe it should be tackled. Asian Trader is the magazine for small retailers throughout the country, exactly the sort of retailers referred to by the hon. Member for Tunbridge Wells (Mr. Norman) and the hon. Member for—I was not sure whether it was Mid-Sussex or mid pink socks, when his feet appeared over the parapet.

Mr. Soames: There is nothing mid about my socks—they are full length.

Mr. Gardiner: Mid pink stockings, in that case.
There is a real problem for the small retailer—the street corner shopkeeper throughout the country. The thrust of the Opposition argument is that the duty equates with a rise in smuggling. That is clearly a fallacy. In real terms, the excise on beer is lower than it has been for 15 years. Between January 1994 and January 1998, it fell by


6 per cent. Therefore, one cannot simply equate the increase in duty with the rise in smuggling. That was the force of my intervention earlier in the debate.

Mr. David Ruffley: Did the hon. Gentleman support the decision by the previous Chancellor to freeze beer duty in the November 1996 Budget?

Mr. Gardiner: I was not in the House at the time. In my capacity as a beer drinker I would have supported that measure, but not in respect of the needs of the Treasury and fiscal policy. If the Opposition oppose the increase in duty by the equivalent of 1p on a pint, they must explain where they would raise the revenue, which amounts to £20 million in the fiscal year 1999–2000. It is not good enough simply to oppose the extra penny in duty and to equate it with the huge increase in smuggling.
We all agree that there should be measures to control smuggling into Britain, but for the hon. Member for Beckenham to say that it should not be a crime absolutely beggars belief. That is exactly why we must have barricades and customs officials at the borders—not only to regulate illegal trade, but to ensure that the proper tax take reaches the Treasury coffers.

Mr. Robathan: I shall not detain the Committee long, and I apologise for the discourtesy of not having been in the Chamber at the start of the debate. However it would have been discourteous to someone else had I rushed in.
I had not intended to speak, but I was astonished by the levity with which Labour Members were treating the issue. At least the hon. Member for Brent, North (Mr. Gardiner) acknowledged its seriousness. It involves gangs of criminal thugs who are extremely violent. Of course we wish to apprehend them, but their criminality is partly caused by the duty that is imposed on alcohol.
I welcome the Government's announcement of extra measures to catch the thugs and confiscate their vehicles, but that is not sufficient to stop the terrible trade that is inducing moral dangers within our society. Gangs of criminal thugs are causing great problems, not just in Dover but throughout the country.
Of course, the problem has resulted from the single market. I would propose that we revisit the issue and looked again at the previous regulations, but that might be contrary to European law. We might not be allowed to reintroduce small limits on what can be brought into Britain.
My hon. Friends who have spoken so far all represent constituencies on the south coast. My hon. Friend the Member for Beckenham (Mrs. Lait) previously represented the south coast. However, the problem is not confined to the south. I represent a constituency in the heart of the country. Small pubs and retailers in my constituency of Blaby are suffering just as much as those on the south coast. There are several small family breweries in the midlands. I receive letters every month from Everards, reiterating the problems experienced by small family breweries, their public houses and their sales of beer.

Mr. Soames: My hon. Friend is right to mention small family breweries. I mentioned two small breweries in the

south of England—King and Barnes of Horsham and Harvey's of Lewes. Does my hon. Friend agree that, if the problem continues, the ultimate penalty will be a serious loss of employment for people working in those breweries?

Mr. Robathan: I agree entirely, and I am grateful to my hon. Friend. We are talking about the livelihood of individuals in all our constituencies that may be affected. They may indeed become unemployed. The problem affects not only big breweries, but small family breweries, publicans and retailers. It also encourages criminality.
Perhaps we should institute one of the new Government's famous reviews into the issue. Certainly, I condemn all criminality. Smuggling is carried out by criminals. It is far from the romantic notion of the 18th century, when smugglers collected kegs of brandy off the coast. Smugglers are criminals who should be punished. The Government have a responsibility to fulfil, and if they do not institute an overriding review of the matter, they should at least freeze duty with a view to reducing it in future to lessen the temptation to which people are currently responding.

Mr. Nick St. Aubyn: May I also apologise to the Committee for having left the Chamber during such an important debate? When I returned, the discussion raging between the two sides of the Committee was reminiscent of past debates about high levels of income tax.
One could well imagine the debates in which Labour Members proposed a rate of income tax of 90 per cent.— I think that at one point it was above 100 per cent.—and argued that those who were not prepared to pay that level of income tax were positively anti-social. Over a number of years, we have persuaded the country—eventually the penny dropped even among Labour Members—that a lower rate of tax can generate more revenue and create a more productive society. The arguments about duty—albeit in a different context—are exactly the same. We are discussing the most efficient level of duty which will raise the maximum revenue for the Exchequer.
The evidence that we have heard this afternoon and that many of us have garnered before shows that the level to which the Government are now pushing beer and other duty is becoming inefficient. Perhaps it is because of the difference between the Inland Revenue and Customs and Excise. It is well known that the customs service is regarded as the rough end of the trade. The contrast between the work of an Inland Revenue officer and a customs officer often resembles that between "The Knock" and "Dixon of Dock Green". However, despite the difference of approach, we want customs officers to do their job extremely well and to concentrate their resources where they are really needed.
If the resources of Customs and Excise are devoted to trying to maintain what may prove to be unrealistically high levels of duty, on drinks such as beer, it may thereby be precluded from devoting sufficient resources to attacking the real menaces in society—including drugs—where its efforts are sorely needed. That is why the ramifications of the Government's approach of ratcheting


up duties without thought for the real economic consequences may well be to the detriment of our entire society.

Dawn Primarolo: We have had an interesting debate covering an important subject, and we have identified two main problems, neither of which the Government take lightly. The first is smuggling—the scale of the problem, the criminal activity, the loss of revenue and the health and social consequences. The second is duty and whether there is a causal relationship between the rate of duty and the increase in smuggling. I shall do my best to deal with all the points that have been raised.
Each year, Customs and Excise conducts a survey, and the resulting figures are agreed with the trade and published in September. Everyone will agree that, by the nature of the issue, estimates are exactly that. However, the Government have not picked figures out of the air with which the trade disagrees. The figures are the result of a survey.
Conservative Members do not do justice to the serious problem of smuggling by inflating their arguments about the likely effect of a 1p increase in duty on a pint of beer. They seem to have a problem distinguishing between the loss of revenue resulting from legitimate cross-border shopping and the loss of revenue resulting from smuggling.
The amount of revenue lost as a result of legitimate cross-border shopping was estimated at £235 million in 1996, compared with £230 million in 1995. I acknowledge that that is £5 million more, but the catastrophic picture that some Opposition Members painted of a Government who completely ignored the consequences of the illegal trade does a disservice to them and the Committee. It is not true. Those figures are made up of all excise duties.
The amount of revenue evaded illegitimately was £900 million in 1996 and £950 million in 1997. Again, I acknowledge that the second figure is larger than the first, but the catastrophic picture that Conservative Members painted is not true, and nor are their claims that the Government are immune to the important arguments against smuggling.

Mrs. Lait: The Financial Secretary has probably cleared up the confusion about the amount lost as a result of cross-border shopping, but no Conservative Member has questioned such losses. Our concern relates to the duty evaded as a result of smuggling and bootlegging, and that is the much larger sum of £950 million. If we agree on that, will the hon. Lady also confirm that that is equivalent to a reduction of about ½p on income tax and 0.5 per cent. on VAT each year?

Dawn Primarolo: The largest amount comes in the tobacco category, particularly hand-rolled tobacco, which we shall debate later, so perhaps I can deal with the matter then.
In defence of small business, the hon. Member for Tunbridge Wells (Mr. Norman) went on at some length about prices in Asda, that well-known corner shop. The hon. Gentleman, like several other Conservative Members, sought to advance the case that the only influence on price is duty.
The right hon. Member for Wells (Mr. HeathcoatAmory), in committing himself to freezing beer duty, did not mention that, in March 1992, March 1993 and January 1995, the Conservative Government substantially increased beer duties. Why has the Conservative party changed its view now?
The RPI figures show that, when this Government increased duty on a pint of beer by 1p, the increase to the consumer was 7p. For four cans of lager—we are told that canned drinks pose a particular problem for the corner shop—the real price increase was 12p. There does not seem to be a direct correlation between duty and price. Price will clearly have an impact on cross-border shopping.

Mr. Norman: Has the Minister, in her estimates of the duty lost, taken into account the extent of fraud? Will she comment on the official import and export figures, which highlighted the problem? I understand that, in 1994, 322,000 hectolitres of beer were exported to France, but the French reported receiving only 148,000 hectolitres, the implication being that the difference is accounted for by fraud.

Dawn Primarolo: I was about to come to the hon. Gentleman's point about diversion fraud. That relates to how much the Exchequer loses, not the producers who are selling the goods and whether they leave the country. I am not suggesting that producers collaborate in diversion fraud; we discussed diversion fraud with them during the review. The hon. Gentleman will know that a high-level EU group is considering the matter, because it does not affect only Britain.

Mr. Edward Davey: I want to comment on who is responsible for the price increase. Has the hon. Lady had a chance to read an article in yesterday's issue of The Licensee and Morning Advertiser which, on page 1, under the headline "Price-rise blow for duty campaigners", deals with the issue and with some of the cant and hypocrisy that we have heard from Conservative Members?

The First Deputy Chairman: Order. The hon. Gentleman is reading from an article, but interventions must be brief.

Dawn Primarolo: I get the general drift of the hon. Gentleman's point. I avidly read many publications, but I cannot recall reading that particular one yesterday. However, I am delighted that it acknowledges, as I think the industry would, that price is the result of a number of complex issues, not just duty.

Mr. Norman: The hon. Lady confirmed the considerable problem of duty fraud. Does she agree that one of the difficulties of duty fraud and contraband is that they distort the marketplace in that it is much easier for the big brewers to participate in the export market and therefore receive the benefits of reimportation or—inadvertently and without intention, of course—the benefits of the fraud trade, whereas the small brewer, who is not packaging and selling into the export trade, is disadvantaged?

Dawn Primarolo: I wanted to deal with the question of smaller brewers in reply to the comments made by the hon. Member for Mid-Sussex (Mr. Soames), so I shall come back to that important point.


Hon. Members went on to suggest that the change in the drinking habits of the drinking public and the demise of the British pub were the Government's fault. The hon. Member for Beckenham (Mrs. Lait) suggested that the Government were actively encouraging criminal activity, which is not the case. I will explain later what action the Government are taking on smuggling.

Mr. Robathan: I assure the Financial Secretary that I, for one, am not pointing the finger of blame at this Government, and that I and other Conservative Members lobbied the previous Government on the problem of smuggling. My point is that the problem is growing and needs action. Far from helping to solve the problem, which has many facets, increasing duty will make it worse. We are not accusing the Government of encouraging criminality; we are accusing them of not taking action.

Dawn Primarolo: With respect, the hon. Member for Beckenham did accuse the Government of actively encouraging criminal activity. I am trying to be fair to those hon. Members who, I know, take seriously smuggling and criminal activity, and who wholeheartedly support the Government's actions.
The hon. Member for Vale of York (Miss McIntosh) mentioned the Oxford economic model. The brewers' suggestion in the model is that, if we cut duty, we shall boost consumption and shall not, therefore, lose money in the long term. That suggests that the short-term impact of a tax cut might be to boost demand, and that lower taxes are likely to increase personal disposable income and temporarily boost GDP. Almost any tax cut would have a similar effect. We dispute—as, I am sure, does every hon. Memberx2014;the brewers' suggestion of a free lunch and the implication that, by continually cutting indirect taxes, we would indefinitely raise output and reduce inflation. That would clearly not be the case.
The hon. Member for Kingston and Surbiton (Mr. Davey) made a helpful contribution about health and tax issues. He made several points about young people and alcohol consumption, which must be part of the wider policy debate conducted by the Government. He will be aware that, yesterday, my right hon. Friend the Leader of the House announced in a statement that a cross-departmental ministerial committee will consider the growth in alcohol consumption by young people, as well as that in smoking, to which I will return.
The hon. Member for Kingston and Surbiton went on to make points about the licensing regime. I know that people think that the Treasury is omnipresent, but as yet, licensing regimes are not within its remit. I therefore note his points, but cannot deal with them.

Miss McIntosh: I accept that there is no such thing as a free lunch, but the Financial Secretary has not replied to my questions about the fact that the Government are committed by the treaty of Rome not to a uniform rate, on which Labour Members have insisted, but to equalising the rates of duty and VAT. That is an important difference. Does she accept that the British presidency has failed in its duty to undertake that exercise and to commission a Commission study on that matter?

Dawn Primarolo: No, I do not accept that. The hon. Lady is aware that harmonisation of indirect taxes is not

a requirement of the treaty of Rome, and that all member states believe, as we do, that it is important to continue to have the right to set the rates.
I have covered the points about price made by the hon. Member for Tunbridge Wells. I have tried to reassure him that we take smuggling seriously. He repeatedly asserted that smuggling has worsened in the past 24 months, but whatever he thinks is happening on the streets, his assertion is not supported by the information available to the Government. The significance of an increase in duty of 1 p on a pint has been tremendously inflated.

Mr. Norman: Will the Minister please confirm that her colleagues in the Home Office are not complaining that smuggling is a worsening problem, and that they are satisfied that it is contained and is static?

Dawn Primarolo: The Government do not refute the importance of smuggling and how we deal with the threats that it poses to revenue, and health and social policy: hence the setting up of the—

Mr. Norman: rose—

Dawn Primarolo: May I finish the answer? The hon. Gentleman must surely expect an answer to his question before he intervenes again.
The Government have made a commitment to set up the alcohol, tobacco and fraud review, and to work with the industry to start to grapple with the difficult problems of smuggling and diversion fraud. That is the first time that such action has been taken. The Opposition seem simply to be arguing that the Government are not moving fast enough, rather than disagreeing with the general direction of our policy.

Mr. Norman: I thank the Minister for attempting to reply to my question. Will she confirm her assertion that smuggling and fraud have not worsened at all in the past 24 months? That is in direct contradiction to claims made by other members of the Government.

The Temporary Chairman: (Mrs. Gwyneth Dunwoody): Order. Interventions are getting longer, and it would be helpful if hon. Members remembered that they should be brief.

Dawn Primarolo: I gave the Committee figures for the change in loss of revenue, which has increased from 1995 to 1996, and is therefore clearly getting worse. We need to be mindful of the scale of the deterioration and consider what would be the most effective response from the Government.
I want to ensure that Opposition Members do not use the debate on a 1 p increase on a pint of beer to imply, and state outside the Chamber, that the Government are complacent about the corrosive effects of smuggling and diversion fraud—we certainly are not.
I am grateful to the hon. Member for Mid-Sussex for his generous comments about Customs and Excise—particularly the operation at Gatwick airport—and its continuing success in dealing with smuggling. He made some suggestions about how customs activity could be expanded to increase our ability to deal with the problem.
The hon. Gentleman also made a special plea for small brewers. He quoted two from his area, but there are several throughout the country. We have recently received proposals from the Society of Independent Brewers for a sliding duty scale for small brewers. The Government are examining those proposals, because we wish to ensure that we respond fairly to the entire industry and to the special pleadings of small brewers.
Ministers have studied the review report. We greatly value the input from the trade, which has been exceptional and very helpful. However, as I have told hon. Members before, in view of the possible public spending implications, the Government will announce their proposals as part of the outcome of the comprehensive spending reviews and when they can be evaluated, as hon. Members have required us to do in this afternoon's debate, against all the Government's priorities. They will be published at that stage. I have always told hon. Members and the trade that that would be need to be subject to questions of commercial confidentiality.
The Opposition sought to characterise the Government as the hate figure of the trade. I shall give one example of how the trade has responded positively to the Government's actions on smuggling. On 27 April, the Wine and Spirit Association of Great Britain and Northern Ireland wrote to me:
I am writing to say 'thank you' to you and the Department's team for the action you are taking to reduce cross border smuggling and the pernicious effects that it has on the legitimate trade.
The trade recognises that the Government's strategy is correct. However, with the exception of the hon. Member for Kingston and Surbiton, Opposition Members cannot bring themselves to acknowledge that the Government are achieving what the Conservatives failed to achieve in 18 years of government. The clause is a reasonable measure to defend Government revenue. The Government have a strategy and a proportionate response to deal with smuggling and to start tackling diversion fraud.

Mr. Heathcoat-Amory: We have heard some exceptional speeches by my hon. Friends. In such debates, hon. Members often revert to type—the only Liberal Democrat solution that we heard from the hon. Member for Kingston and Surbiton (Mr. Davey) was to try to persuade other EU member states to increase their rates of duty in line with ours. As usual, the Liberal Democrats go for the high-tax, harmonised solution, which is simply a pipe dream. We should try, even slowly, to reduce our duty rates in the direction of those on the continent if we are to remove the cause of the illegality and smuggling.
A number of my hon. Friends spoke in this debate. My hon. Friend the Member for Vale of York (Miss McIntosh) has pursued this matter in the European Parliament as well, and my hon. Friend the Member for Tunbridge Wells (Mr. Norman) brought to bear an unrivalled knowledge of the retail trade. In a Chamber that is not over-burdened with practical business experience, his speech was particularly telling and valuable.
My hon. Friend the Member for Beckenham (Mrs. Lait) has pursued this matter over several Parliaments. Her comments were largely ignored in the Minister's wind-up speech. The chief point stressed by my hon. Friends the Members for Mid-Sussex (Mr. Soames), for Blaby (Mr. Robathan) and for Guildford (Mr. St. Aubyn), all in different ways, was the seriousness of what is happening. That contrasted starkly with the attitude of Labour Members, who seemed almost to deny that a problem was being experienced either as a result of massive cross-border shopping—a huge new industry has been set up in France selling drink back to us and therefore denying us business, profit, jobs and duty to the Treasury—or as a result of large-scale smuggling and duty fraud.
Labour Members' comments show how quickly, in government, they have become out of touch with their constituents. They have only to go into their local off-licences or pubs to discover what people are saying.
The problem is serious and getting worse. The Financial Secretary gave some figures that show that the problem is escalating and that the loss of duty is increasing. That is happening even before the increase in duty as a result of last year's Budget and the increase when the clause comes into effect. When those duty increases work through, in contrast to the freeze in duty in the last two years of the Conservative Government, the situation really will get worse. Moreover, the strong pound makes cross-border shopping all the more attractive.
The Minister did not answer the point about the broken promise on the review. The Prime Minister promised, in the main trade journal, that there would be an urgent, independent, comprehensive study of the problem. He has broken that promise. There has certainly been no urgent study, because even the one carried out by Customs and Excise has not yet come out. In any case, it is not independent, because it has been carried out by a Government Department. It is not comprehensive because the trade report said that Customs and Excise has, on the instruction of Ministers, ruled out examination of the two main measures that could control the problem—either the reinstatement of border controls or the approximation of duty rates.
5.45 pm
All we have is a secret study, which has not been published, despite Government words about openness, accountability and the public's right to know, but has been carried out within the Government. We await that study—even if it could not be published on time at the end of last year, it would inform our debates at later stages. As my hon. Friend the Member for Tunbridge Wells said, if we do not have it, we shall strongly suspect that its conclusions are embarrassing to the Government and critical, of their policy.
They might well be critical, because, in our last two years in office, we froze duty rates. Despite a large budget deficit, we moved, albeit slowly, to narrow the gap between rates of duty and thus provide a disincentive to the illegal trade and cross-border shopping. That contrasts with the actions of this Government who, despite their looming budget surplus, have again increased those rates of duty. I shall invite my hon. Friends to vote against the clause.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 293, Noes 123.

Division No. 258]
[5.46 pm


AYES


Abbott, Ms Diane
Cox, Tom


Adams, Mrs Irene (Paisley N)
Cranston, Ross


Ainger, Nick
Crausby, David


Ainsworth, Robert(Cov'try NE)
Cummings, John


Alexander, Douglas
Cunliffe, Lawrence


Allan, Richard
Cunningham, Rt Hon Dr John


Allen, Graham
(Copeland)


Anderson, Donald(Swansea E)
Cunningham, Jim (Cov'try S)


Anderson, Janet (Rossendale)
Cunningham, Ms Roseanna


Armstrong, Ms Hilary
(Perth)


Ashton, Joe
Dafis, Cynog


Atherton, Ms Candy
Dalyell, Tam


Atkins, Charlotte
Davey, Edward (Kingston)


Baker, Norman
Davidson, Ian


Ballard, Mrs Jackie
Davies, Rt Hon Denzil (Llanelli)


Banks, Tony
Davies, Geraint (Croydon C)


Bayley, Hugh
Dawson, Hilton


Beckett, Rt Hon Mrs Margaret
Denham, John


Beggs, Roy
Dewar, Rt Hon Donald


Bell, Stuart(Middlesbrough)
Dobbin, Jim


Benn, Rt Hon Tony
Dobson, Rt Hon Frank


Bennett, Andrew F
Donohoe, Brian H


Benton, Joe
Dowd, Jim


Best, Horald
Drew, David


Betts, Clive
Drown, Ms Julia


Blackman, Liz
Eagle, Angela (Wallasey)


Blizzard, Bob
Eagle, Maria (L'pool Garston)


Borrow, David
Ellman, Mrs Louise


Bradley, Peter (The Wrekin)
Ewing, Mrs Margaret


Bradshaw, Ben
Fatchett, Derek


Brand, Dr Peter
Fearn, Ronnie


Breed, Colin
Fisher, Mark


Brinton, Mrs Helen
Flynn, paul


Brown, Rt Hon Gordon
Follett, Barbara


(Dunfermline E)
Foster, Rt Hon Derek


Brown, Rt Hon Nick (Newcastle E)
Foster, Michael Jabez (Hastings)


Brown, Russell (Dumfries)
Foster, Michael J (Worcester)


Browne, Desmond
Foulkes, George


Burden, Richard
Fyfe, Maria


Burgon, Colin
Galloway, George


Butler, Mrs Christine
Gardiner, Barry


Byers, Stephen
George, Andrew (St Ives)


Cable, Dr Vicent
George, Bruce (Walsall S)


Campbell, Alan (Tynemouth)
Gerrard, Neil


Campbell, Mrs Anne (C'bridge)
Gibson, Dr Ian


Campbell, Menzies (NE Fife)
Godman, Dr Norman A


Campbell, Ronnie (Blyth V)
Godsiff, Roger


Campbell-Savours, Dale
Golding, Mrs Llin


Canavan, Dennis
Gorrie, Donald


Cann, Jamie
Grant, Bernie


Caplin, Ivor
Griffiths, Jane (Reading E)


Casale, Roger
Grocott, Bruce


Caton, Martin
Gunnell, John


Chaytor, David
Hain, Peter


Chisholm, Malcolm
Hall, Mike (Weaver Vale)


Clark, Dr Lynda
Hall, Patrick (Bedford)


(Edinburgh Pentlands)
Hanson, David


Clark, Paul (Gillingham)
Heal, Mrs Sylvia


Clarke, Charles (Nowich S)
Heath, David (Somerton & Frome)


Clarke, Eric (Midlothian)
Henderson, Ivan (Harwich)


Clarke, Rt Hon Tom (Coatbridge)
Hepburn, Stephen


Clwyd, Ann
Heppell, John


Coaker, Vernon
Hesford, Stephen


Coleman, Iain
Hinchliffe, David


Cook, Frank (Stockton N)
Hoey, Kate


Corbyn, Jeremy
Home Robertson, John


Cotter, Brian
Hood, Jimmy


Cousins, Jim
Hoon, Geoffrey





Hopkins, Kelvin
Mullin, Chris


Howarth, George (Knowsley N)
Murphy, Denis (Wansbeck)


Howells, Dr Kim
Murphy, Jim (Eastwood)


Hoyle, Linsay
Oaten, Mark


Humble, Mrs Joan
O'Brien, Bill (Normanton)


Hurst, Alan
O'Brien, Mike (N Warks)


Hutton, John
O'Neill, Martin


Iddon, Dr Brian
Organ, Mrs Diana


Illsley, Eric
Osborne, Ms Sandra


Jackson, Ms Glenda (Hempstead)
Palmer, Dr Nick


Jackson, Helen (Hillsborough)
Pearson, Ian


Jamieson, David
Perham, Ms Linda


Jenkins, Brian
Pickthall, Colin


Johnson, Alan (Hull W & Hessle)
Pike, Peter L


Johnson, Miss Melanie
Plaskitt, James


(Welwyn Hatfield)
Pond, Chris


Jones, Barry (Alyn & Deeside)
Pound, Stephen


Jones, Helen (Warrington N)
Powell, Sir Raymond


Jones, Ms Jenny
Prentice, Ms Bridget (Lewisham E)


(Wolverh'ton SW)
Prentice, Gordon (Pendle)


Jones, Jon Owen (Cariff C)
Primarolo, Dawn


Jones, Martyn (Clwyd S)
Purchase, Ken


Kaufman, Rt Hon Gerald
Quin, Ms Joyce


Keeble, Ms Sally
Quinn, Lawrie


Keen, Ann (Brentford & Isleworth)
Radice, Giles


Kennedy, Charles (Ross Skye)
Rammell, Bill


Kennedy, Jane (Wavertree)
Rapson, Syd


Kilfoyle, Peter
Reed, Andrew (Loughborough)


King, Andy (Rugby & Kenilworth
Reid, Dr John (Hamilton N)


Kingham, Ms Tess
Roche, Mrs Barbara


Kirkwood, Archy
Rogers, Allan


Kumar, Dr Ashok
Rooker, Jeff


Lawrence, Ms Jackie
Roy, Frank


Laxton, Bob
Ruddock, Ms Joan


Lepper, David
Russell, Bob (Colchester)


Leslie, Christopher
Sanders, Adrian


Levitt, Tom
Sarwar, Mohammad


Lewis, Ivan (Bury S)
Savidge, Malcolm


Liddell, Mrs Helen
Shaw, Jonathan


Livingstone, Ken
Sheerman, Barry


Livsey, Richard
Sheldon, Rt Hon Robert


Lloyd, Tony (Manchester C)
Skinner, Dennis


Llwyd, Elfyn
Smith, Angela (Basildon)


Lock, David
Smith, Rt Hon Chris (Islington S)


Love, Andrew
Smith, Miss Geraldine


McAllion, John
(Morecambe & Lunesdale)


McAvoy, Thomas
Smith, Jacqui(Redditch)


McCabe, Steve
Smith, John(Glamorgan)


McCafferty, Ms Chris
Smith, Llew (Blaenau Gwent)


McDonnell, John
Spellar, John


McFall, John
Steinberg, Gerry


McGuire, Mrs Anne
Stevenson, George


McIssac, Shona
Stewart, David (Inverness E)


McKenna, Mrs Rosemary
Stinchcombe, Paul


Mackinlay, Andrew
Stoate, Dr Howard


McNamara, Kevin
Stott, Roger


McNulty, Tony
Strang, Rt Hon Dr Gavin


Mactaggart, Fiona
Stringer, Graham


Mallaber, Judy
Swinney, John


Mandelson, Peter
Taylor, Rt Hon Mrs Ann


Marsden, Gordon (Blackpool S)
(Dewsbury)


Marshall, David (Shettleston)
Taylor, Matthew (Truro)


Marshall, Jim (Leicester S)
Temple—Morris, Peter


Maxton, John
Thomas, Gareth(Clwyd W)


Michael, Alun
Thomas, Gareth R (Harrow W)


Michie, Bill (Shef'ld Heeley)
Tipping, Paddy


Michie, Mrs Ray (Argyll & Bute)
Tonge, Dr Jenny


Milburn, Alan
Touhig, Don


Mitchell, Austin
Trickett, Jon


Moffatt, Laura
Truswell, Paul


Moonie, Dr Lewis
Turner, Dennis (Wolverh'ton SE)


Moore, Michael
Turner, Dr Desmond (Kemptown)


Morgan, Ms Julie (Cardiff N)
Turner, Dr George (NW Norfolk)


Morley, Elliot
Twigg, Derek (Halton)


Morris, Rt Hon John (Aberavon)
Tyler, Paul


Mudie, George
Wallace, James






Walley, Ms Joan
Wills, Michael


Watts, David
Winnick, David


Welsh, Andrew
Wise, Audrey


Wicks, Malcolm
Wood, Mike


Wigley, Rt Hon Dafydd
Wray, James


Williams, Rt Hon Alan



(Swansea W)
Teller for the Ayes:


Williams, Alan W (E Carmarthen)
Mr, Greg Pope and


Willis, Phil
Mr. David Clelland.




NOES


Ainsworth, Peter (E Surrey)
Lansley, Andrew


Ancram, Rt Hon Michael
Leigh, Edward


Arbuthnot, James
Letwin, Oliver


Atkinson David (Bour'mth E)
Lewis, Dr Julian (New Forest E)


Baldry, Tony
Lidington, David


Bercow, John
Lilley, Rt Hon Peter


Blunt, Crispin
Lloyd, Rt Hon Sir Peter (Fareham)


Bottomley, Peter (Worthing W)
Loughton, Tim


Brady, Graham
Luff, Peter


Brazier, Julian
Lyell, Rt Hon Sir Nicholas


Brooke, Rt Hon Peter
MacGregor, Rt Hon John


Browning, Mrs Angela
McIntosh, Miss Anne


Burns, Simon
MacKay, Andrew


Cash, William
Maclean, Rt Hon David


Chapman, Sir Sydney
McLoughlin, Patrick


(Chipping Barnet)
Madel, Sir David


Chope, Christopher
Malins, Humfrey


Clappison, James
Mates, Micheal


Clark, Rt Hon Alan (Kensington)
Maude, Rt Hon Francis


Clark, Dr Michael (Rayleigh)
Mawhinney, Rt Hon Sir Brain


Clarke, Rt Hon Kenneth
Moss, Malcolm


(Rushcliffe)
Nicholls, Patrick


Clifton—Brown, Geoffrey
Norman, Archie


Collins, Tim
Ottaway, Richard


Colvin, Michael
Paterson, Owen


Cormack, Sir Patrick
Prior, David


Cran, James
Randall, John


Curry, Rt Hon David
Redwood, Rt Hon John


Davies, Quentin (Grantham)
Robathan, Andrew


Davis, Rt Hon David (Haltemprice)
Robertson, Laurence (Tewk'b'ry)


Day, Stephen
Roe, Mrs Marion (Broxbourne)


Dorrell, Rt Hon Stephen
Rowe, Andrew (Faversham)


Duncan Smith, Iain
Ruffley, David


Evans, Nigel
St Aubyn, Nick


Fabricant, Michael
Sayeed, Jonathan


Fallon, Michael
Shepherd, Richard


Forth, Rt Hon Eric
Simpson, Keith (Mid—Norfolk)


Fowler, Rt Hon Sir Norman
Soames, Nicholas


Fox, Dr Liam
Spelman, Mrs Caroline


Fraser, Christopher
Spicer, Sir Michael


Garnier, Edward
Spring, Richard


Gibb, Nick
Stanley, Rt Hon Sir John


Gorman, Mrs Teresa
Steen, Anthony


Green, Damian
Streeter, Gary


Greenway, John
Swayne, Desmond


Grieve, Dominic
Syms, Robert


Hague, Rt Hon William
Tapsell, Sir Peter


Hamilton, Rt Hon Sir Archie
Taylor, Sir Teddy


Hammond, Philip
Tredinnick, David


Harvey, Nick
Trend, Michael


Hayes, John
Tyrie, Andrew


Heald, Oliver
Viggers, Peter


Heathcoat—Amory, Rt Hon David
Wardle, Charles


Horam, John
Waterson, Nigel


Howarth, Gerald (Aldershot)
Whitney, Sir Raymond


Hunter, Andrew
Widdecombe, Rt Hon Miss Ann


Jack, Rt Hon Michael
Willetts, David


Jackson, Robert (Wantage)
Wilshire, David


Johnson Smith,
Winterton, Mrs Ann (Congleton)


Rt Hon Sir Geoffrey
Woodward, Shaun


Key, Robert
Young, Rt Hon Sir George


King, Rt Hon Tom (Bridgwater)



Kirkbride, Miss Julie
Tellers for the Noes:


Laing, Mrs Eleanor
Mr. John M. Taylor and


Lait, Mrs Jacqui
Mr. John Whittingdale.

Question accordingly agreed to.

Clause I ordered to stand part of the Bill.

Clause 7

Rates of Duties And REBATES

Mr. Heathcoat-Amory: I beg to move amendment No. 12, in page 3, line 39, leave out '£0.4926', and insert '£0.48'.
Even in the context of a tax-raising Budget, the impost on road fuels was particularly savage. The amendment seeks to moderate the increase to bring it back into line with the so-called escalator that we left behind when we lost office. The private motorist and commercial road users face steep increases, and, as ever, the Library has been helpful in working out the implications of the new transport fuels policy that was announced in the Budget.
The increase in the escalator from 5 to 6 per cent. in real terms, the fact that the Government have brought forward the implementation date, and an extra increase in the duty on diesel and super unleaded petrol, add up to an additional tax burden of £9 billion over this Parliament. By any standard, that is a huge additional burden, and it is an inefficient way to reduce car use, if that was the intention. Of course it has an effect on the private motorist and a most unfortunate effect on those in rural areas where many people must have cars—there is no realistic alternative to the car for getting to work or for use in the course of daily routine. Against the huge, almost staggering, increase in the overall tax burden, the £50 million that is to be allocated to rural bus services over three years is gesture politics at its worst. It is an insult to people who live in those areas.
Mr. Dafydd Wigley (Caernarfon): Does the right hon. Gentleman agree that the burden will hit rural areas at a particularly inopportune time, in view of the severe decline in farm incomes? A reduction of 89 per cent. has been reported in a study in Wales in the past year. This is the worst time for such additional impositions to be placed on rural areas.

Mr. Heathcoat-Amory: I entirely agree. The right hon. Gentleman and I have rural constituencies. I represent the second main dairy county in Britain, and the hon. Gentleman's area has a marked concentration of agricultural and allied industries, both of which are suffering grievously from reduced prices and subsidies and the strength of the pound. The increase in fuel duty on top of those factors is a burden that people find hard to understand from a Government who talk much about their inclusiveness and their aim to help what they call rural communities.

Mr. Cranston: I should like to draw the Committee's attention to what the right hon. Member for Wells (Mr. Heathcoat-Amory) said in January 1995 when this issue was being addressed:
I accept that some things are more expensive in rural areas. Some things are more expensive in urban areas. That is the interplay of a market and the inheritance of the past."—[Official Report, 23 January 1995; Vol. 253, c. 104.]


Would the right hon. Gentleman like to comment on that?

Mr. Heathcoat-Amory: That was an entirely different debate. I conceded at that time—and I have always recognised—that those who live in rural areas rely more on cars. That is the issue that we are debating. It is undoubtedly true that some services are more expensive in rural areas, and nothing that the Government can do could alter that. What I said at that time is right, and I withdraw nothing whatever from it. It does not contradict my point that the increase in petrol and other fuels, which affect everyone, are especially burdensome for people in rural areas who are already damaged, as the right hon. Member for Caernarfon (Mr. Wigley) said, by the poor state of farming.

Mr. John Bercow: The hon. Member for Dudley, North (Mr. Cranston) mentioned the debate of 23 January 1995. Is my right hon. Friend aware that, on that day, the Financial Secretary, who was then in opposition, said of an increase in fuel duty:
People living in rural areas will be badly affected."—[Official Report, 23 January 1995; Vol. 253, c. 99.]
She also said that to portray such a measure as environmental was cynical. Was she wrong then, is she wrong now, or does not she know which?

Mr. Heathcoat-Amory: The difference is that, in 1995, the hon. Lady was not in a position to do anything on this matter. Now that she is in office, she is able to deliver. During the debate, we shall see whether her words were hollow or whether she intends to deliver on her intentions at that time.
We are debating the effects on rural areas of the increased duty, but the increase will also affect industrial costs, which are also incurred in rural areas, and the United Kingdom's entire distribution chain. All raw materials have to be moved and all goods distributed; the fuel that propels most of that movement is diesel, the fuel of industry.
The Budget signals a duty increase on diesel higher than that on petrol. Furthermore, the Red Book signals that future Budgets will widen the gap and that diesel duty will go on increasing at a higher rate than the duty on petrol in spite of the fact that diesel duty in the United Kingdom is already the highest in the European Union. The Freight Transport Association reports that it is 70 per cent. above the average of EU member states, so there is a competition point.
Industry and exporters in particular are suffering because of the high pound, and the Government are burdening them with a tax increase that goes to the heart of the productive economy. It is not hard to see what will happen. Not only will competitiveness, investment and the capacity to create new jobs be hit; there will be every incentive to hauliers conducting international business to fill their tanks abroad. That is not a trivial problem. If all the lorries that go to the continent leave with empty tanks and return with full ones, there will be a significant drain on the Revenue. When working out the yield from the increase in diesel duty, the Financial Secretary must have estimated the effects of what will be lost through hauliers

and others filling their tanks overseas. There will be a significant loss of revenue if big articulated lorries with empty tanks fill up in France rather than in this country.

Mr. Leslie: While we are talking about loss of revenue, perhaps the right hon. Gentleman will tell us the cost to the Exchequer of his amendment. I understand that it might be in the region of £400 million. Will he confirm that? How does he plan to raise that extra money?

Mr. Heathcoat-Amory: I shall come to the amendment in due course. To put the hon. Gentleman out of his misery, I assure him that we are merely returning the escalator to what we left behind in our Red Book. The Labour party has taken over all our expenditure commitments. Why cannot it take over our taxation estimates as well? If the hon. Gentleman supports that, he will support an amendment that would reduce the extra burden of taxation and return to the estimates that we left behind. There would be no loss of revenue, but a continuation of the revenue that we wrote into our last Budget. I am grateful to the hon. Gentleman for his intervention.
The effect of the annual increase in fuel duties is estimated as equivalent to 1 p on the basic rate of income tax every year. Those increases affect not just industry and distribution, but public services. Labour Members sometimes overlook the fact that ambulances and police cars run on the more expensive fuel. Without compensation, the increases in duty represent a real-terms cut in expenditure on those public services.
The Government's excuse for the increase in diesel duty is to encourage the use of low-sulphur diesel. We all know that the compounds produced when sulphur combines with oxygen are part of the pollution problem, particularly in cities, but instead of creating an incentive by reducing the cost of low-sulphur diesel, the Government have increased the duty on that fuel by more than the increase on petrol. It has gone up by 9.4 per cent. That is the second increase in less than a year. The only incentive is that the duty on ordinary diesel has gone up by even more—by 11.7 per cent. That is also the second increase in eight months. They are using a stick rather than a carrot.
The policy is particularly stupid given the Government's professed concern about global warming. My information from the industry is that taking a tonne of sulphur out of diesel releases 20 tonnes of carbon dioxide into the atmosphere because the procedure is very energy-intensive. There is then also the problem of disposing of the sulphur.
Diesel is a more efficient fuel than petrol for carbon dioxide emissions. A vehicle can go further on a gallon of diesel than on a gallon of petrol, and the combustion of the fuel produces less carbon dioxide. If the Government are concerned about global warming, why are they encouraging an industrial process that releases more carbon dioxide? Why are they encouraging the use of petrol rather than diesel?

Mr. Geoffrey Clifton-Brown: Does my right hon. Friend agree that, in balancing petrol against diesel, the Government have also forgotten about the cancerous effects of the benzine and benzine-related compounds in petrol, which are absent from diesel?

Mr. Heathcoat-Amory: My hon. Friend is probably right, but we do not know what the Government have forgotten, because they will not tell us. We could have had the answers to my hon. Friend's question if the Government had fulfilled their promise to accompany their Budget with a green book setting out the environmental implications of Government policy. As the Treasury Committee has recently observed, no green book was forthcoming, despite a promise by the Financial Secretary that one would be published. Perhaps she will fulfil that promise when she answers the debate. Even if she cannot produce the book this afternoon, she can at least tell us when it will be published, in line with her earlier assurance. The Government are in a muddle. They are setting up contradictory incentives. Their environmental goals are not clear.
The amendment would return the duty increase to the 5 per cent. escalator that we set in motion, and would restrict its implementation to once a year. The arithmetic in the amendment may not be exact—it is for the Government to improve on it if they can—but our intention is clear. We have taken approximately two thirds of the 5 per cent. increase that we left behind in recognition of the fact that this is the second increase in eight months. We are reducing the escalator, because we should get back to annual increases rather than trying to squeeze them in every eight months. That would lift the burden of the £9 billion extra hit on the private motorist and the productive sector of the economy caused by the Government's new policy on the taxation of fuel. If the amendment is accepted, as it should be, we shall strike a blow for industry, public services and the private motorist.

Mr. St. Aubyn: I support the amendment. The Government are in danger of devaluing an important principle. The previous Government fully endorsed the principle of using economic levers up to a point to change behaviour. We encouraged people to switch to unleaded petrol by changing the rates of duty between unleaded and leaded. A measured increase in petrol duties was part of a programme of persuading people to use their cars less and to use public transport more.
The Government must explain why increasing the scale on which the duties are raised from 5 per cent. to at least 6 per cent. will make any difference. I do not believe that it will. A measured rise in duty is helpful as part of an overall programme to encourage people to switch from using their cars to using public transport, but on its own it is not an answer. With their excessive rise in petrol duty, the Government are putting too much faith in one policy. That will not work. The huge increases in traffic through my constituency despite increases in duty in recent years show that the use of the private car will not be influenced by the price of petrol alone. A huge convenience factor must be addressed before we can hope to stem the increase in traffic.
On Friday, we debated the Road Traffic Reduction (National Targets) Bill. It is evident that there is support on both sides of the House for measures that discourage motor traffic, but they must be carefully considered. The Government's proposal is an attempt merely to cap the previous Government's policy by taking it that step further, but without thinking through the consequences. I am sure that we shall hear from hon. Members who represent rural areas, such as Cornwall, where I used to

live, which will be very hard hit by the scale of the increase that the Government have proposed for all road users without thinking through what other measures are needed.
The extra burden on the car driver will not make any difference to the increasing traffic in lanes around Guildford. It will not save us from problems on Halfpenny lane in Chilworth or through villages such as Compton and Puttenham, where the massive increase in traffic is causing tremendous disquiet. If the Government's only response is to raise petrol duty, it is simply not good enough. That will not solve the problem.

Mr. Bercow: Does my hon. Friend agree that, if the Government think that an increase in duty will reduce the use of the private motor car, they owe it to the House and to the public to publish an estimate of what they believe that reduction will be? If they fail to do so, we can assume that they do not expect a reduction in usage, and that the proposal is just a smash-and-grab raid on taxpayers.

Mr. St. Aubyn: I thank my hon. Friend for pointing out that what really lies behind the Government's proposal is greed. They simply want to grab as much money as they can from the taxpayer. It is old-fashioned socialist greed. The implication is that those with the largest cars will pay the most. The calculation is spinning through the brains of Labour Members as we debate the issue. I would go further than my hon. Friend: the Government should not only publish estimates of how much the additional levy will reduce road traffic but tell us how they will spend the additional revenue to encourage alternative uses.
I should like to draw the Committee's attention to some very interesting alternative means of transport in my constituency that are at the forefront of thinking on the issue. They demonstrate the inadequacy of the Government's response in clause 7. The concept of an ultra-light railway system has been promoted by a firm based in Guildford that gave a presentation in the House only a few weeks ago. The system could have a significant impact in town centres such as Guildford by encouraging people not to use their cars. The concept relies not only on increases in duty but on new technology. More to the point, it is a purely market-driven solution, which requires no public subsidy.
The Temporary Chairman: Order. We are discussing rates of duty; I am sure that the hon. Gentleman knows that.

Mr. St. Aubyn: I am just contemplating how the additional revenue that the Government are planning to raise through the excessive increase in duty might be put towards a constructive policy of discouraging the use of the private motor car. If the Government cannot come up with such a policy, the idea that the motorist should be arbitrarily penalised clearly becomes highly debatable.

The Temporary Chairman: Order. This is all very interesting, but I am afraid that we are debating a rather narrow amendment. I am sure that the hon. Gentleman would like to return to it.

Mr. St. Aubyn: I am grateful for your excellent guidance, Mrs. Dunwoody.
We should emphasise that the Government are proposing a very narrow-minded policy that does not go nearly far enough towards solving the problems that face this country. Behind the example of the ultra-light railway is the fact that we shall solve the problems of excessive traffic through market solutions.

Mr. Clifton-Brown: Will my hon. Friend call on the Government to publish the specific environmental benefits of not raising the escalator, as we propose in amendment No. 12? No figures have been published either in the notes on clauses or in the Red Book to indicate specific environmental gains in terms of carbon dioxide emissions.

Mr. St. Aubyn: My hon. Friend makes a very valid point. I hope that the Financial Secretary is making careful notes because recent interventions show just how far short the Government have fallen of what they should be achieving. If they want any support in the Lobby tonight, they must show that there is a purpose behind imposing additional levies on the motorist. The purpose must surely be traffic reduction.
We must come forward with market-driven solutions. As a result of the policy instituted by the previous Government, there is evidence that although an increase in petrol duty may form part of a comprehensive strategy, it cannot be the whole strategy. If it cannot be the whole strategy, it is simply not fair, particularly on less well-off people in rural areas who depend on cars, to penalise the motorist by proposing such taxes.

Mr. John Swinney: I support the amendment because some moderation of the Government's proposed increase is better than nothing. I calculate that the percentage increase recommended by the Conservatives was of the order of 6 per cent., against the 9 per cent. that the Government propose. It is important that we do something to moderate the proposed severe increase in petrol duty.
There has been much double-talk in this debate from Conservative spokesmen who have denounced measures that they were quite happy to introduce when they were on the Government Benches. I shall spare the Committee any further points on the hypocrisy of both main parties on this issue.

Mr. Heathcoat-Amory: The hon. Gentleman has just said that he wants to return the duty increase to the level that applied under the previous Government, which is exactly what the amendment proposes. Why, therefore, is it hypocritical for us to get together on the same issue?

Mr. Swinney: Although I am grateful for that intervention, it is a curious way to welcome friends into the body of the kirk, as we would say in Scotland. I would have much preferred the amendment tabled by my hon. Friends and myself—or, possibly, that tabled by the Liberal Democrats. Unfortunately, those amendments were not selected.

Mr. Bercow: It is sour grapes.

Mr. Swinney: It is not sour grapes. It is just a recognition that the Conservatives, as usual, are offering us a second-best solution to the problem, which I am happy to support.
If the clause is passed without amendment, we will have witnessed two inflation-busting increases in 12 months, totalling three in 18 months. As a Member of Parliament who represents a very large part of Scotland and a diverse rural constituency, I know that the increases are very damaging to the health of the rural economy.
I have listened carefully to, and comprehend, the Government's arguments at different stages in the Bill's passage on why it is necessary to go down such a route to reduce vehicle use and traffic congestion, protect the environment, reduce emissions, and all the rest of it.
On Second Reading, I questioned the Chief Secretary on that very point. I asked him what information the Government had at their disposal to suggest that increasing duty on petrol reduced car use. I thought that was a straightforward question. The Chief Secretary replied:
The matter has been looked into. If fuel duties are increased, there is a reduction in car use and lower carbon dioxide emissions."—[Official Report, 21 April 1998; Vol. 310, c. 609.]
That sounded clear, but, to make sure, I thought that I would ask a written question to get the information out into the public domain. I asked the Chancellor
what data he has evaluated indicating that increasing the duty on fuel results in lower car use; and if he will make the studies available in the Library.
The Financial Secretary kindly responded:
I shall let the hon. Member have a reply as soon as possible.
That did not suggest to me that there was compelling evidence in the Treasury to suggest that increasing the cost of petrol resulted in less car use. I am sure that the full answer is in the post.
I question the central thrust of the Government's strategy in the clause, which is that increases in the cost of petrol will result in lower fuel use. The arguments are much more closely related to a balanced debate on road pricing, increasing parking charges in city centres such as London, and differential levels of vehicle excise duty in different parts of the country. I do not believe that the Government's approach of increasing duty disproportionately beyond the rate of inflation will work.

Mr. Cranston: Did the hon. Gentleman also ask the Financial Secretary about the benefits that his constituency will receive from the £50 million a year for bus services for the next three years?

Mr. Swinney: I would not need the Financial Secretary's advice to get my calculator out to start working my way through that £50 million over three years for a number of large and diverse rural constituencies. I got into some trouble in a recent radio debate involving the hon. Member for Gordon (Mr. Bruce), when I suggested that there were no public transport services in my constituency. That was careless, because the next day I received a letter from the Stagecoach bus company telling me how many buses went through my constituency.

Mr. David Heath: The hon. Gentleman's constituency has some similarities to mine in terms of its rurality. Many households need more than one car to go about normal life, because public transport


does not exist for them. Does the hon. Gentleman agree that one way of making the imposition fairer on rural areas would be a drastic reduction in vehicle excise duty, with that package being presented to the rural motorist as environmental, but fair?

Mr. Swinney: Such a solution would take account of the differences between areas. Petrol prices in London are substantially lower than in parts of my constituency, such as Blairgowrie, Pitlochry and Forfar.
The essential nature of cars in rural communities was outlined by the Scottish Office in 1987, which said:
"a car in a remote area may be both highly unreliable and barely affordable but nevertheless essential to survival and any households without a car in remote areas must be at a severe disadvantage."
Statistical evidence shows that, on average, 57 per cent. of households in Scotland have one car. In the highlands, the figure is 68.5 per cent.; in Grampian it is 68.3 per cent.; and in the northern isles it is 70 per cent. By my calculations, when above-inflation increases are taken into account, the increase proposed in the Bill means that an average rural car user will have paid about £60 extra a year since 1993. That is about £400 over that period for rural car users—an enormous burden for people who survive on fairly modest incomes, particularly in the current financial climate.
Earlier, the hon. Member for Shipley (Mr. Leslie) intervened on the right hon. Member for Wells (Mr. Heathcoat-Amory) and referred to a quotation from 1995. One of the points that I would use to shore up the argument that the right hon. Gentleman made is that, when petrol increases are introduced, the effect on small shops and the price of commodities—which is already higher in rural areas than in urban areas—is severe. That must be appreciated when decisions of this nature are made.
I have looked at the information on travel-to-work patterns in rural areas of Scotland provided by Highlands and Islands Enterprise. In the UK, about 9.85 per cent. of people travel to work by bus; in the highlands and islands, the proportion is 6.6 per cent.—showing a further differential in the availability of public transport and the essential nature of the car.
The Government have embarked on a route that—as has been drawn to their attention in the Budget debates, at Second Reading and again today—is damaging the rural economy at a time when it is at one of the most fragile stages of its development. I urge the Government to think again and to give greater consolation than the £50 million over three years. [HON. MEMBERS: " fifty million a year."] I stand corrected. If that amount is broken down into individual constituencies—and the type of work required to build effective public transport services in fragile rural areas is considered—it will not take us very far on the bus.

Mr. Malcolm Bruce: Is the hon. Gentleman aware that the city of Aberdeen is discussing a possible cross-city commuter railway service, using the existing railway line? It is estimated that that would cost £30 million to £50 million. One project in one city could use the entire amount—and that is a project to bring rural people to work.

Mr. Swinney: The hon. Gentleman makes a valid point, which touches on the impact on cities such as

Aberdeen of the growing commuter belts outwith the major cities. The same problem exists in Perth and Dundee.
I conclude with some information on comparative petrol prices, which was kindly provided—I could not quite believe the source—by BBC Ceefax in April 1998. This country has the fourth largest average price for unleaded petrol in the EU, and many other countries operate with lower petrol prices. The Government, by pursuing the measures in the clause, are entrenching a problem which is felt by many people—particularly, and most severely, people in rural areas.

Mr. Burney: It would be in the interests of hon. Members to remember that this is yet another tax increase, a tax increase that the Prime Minister said before the last election he would not be making. House of Commons figures—which Opposition Members have not denied—show that an average household will be more than £1,000 a year worse off as a result of mortgage rate and tax increases.
No one in the Chamber, Mr. Haselhurst, has even attempted to deny the independence and judgment of those figures. [HON. MEMBERS: "Sir Alan."] You have always been a knight in my eyes, Sir Alan. A large component of that burden on average families comes through increases in duty, including petrol duty.
The increase is in three parts. The escalator is going up from 5 to 6 per cent. Then there are the two timing changes that the Government have introduced in respect of the previous financial year: the timing was moved from November to July and there is the more long-term change of moving the point of operation of the tax increase from November to March. Those constitute three separate increases.
That is not more or less what the previous Government did. It is defying the laws of arithmetic to suggest that the increases in the Bill are more or less what the previous Conservative Chancellor was engaged in. It is complete nonsense. If Labour Members bother to read the Red Book, they will discover why. It shows that the estimate for the amount of revenue to be raised between 1997–98 and 2002 is over and above the estimate under the Tory 5 per cent. escalator: it is £9 billion more than under the Conservative escalator. A colossal amount of revenue is being raised by the increases that the Bill would put into effect. For that reason, we suggest that the increase be pegged to 5 per cent.
With that extra £9 billion over those financial years, a burden will be placed on the countryside. There is no other way in which to interpret £9 billion extra in revenue. Liberal Democrat Members have drawn attention to the experience of their constituencies. [HON. MEMBERS: "Nationalist Members."] I am sure that the hon. Member for Somerton and Frome (Mr. Heath) will make that point; he has already made it in an intervention.
The increases fall on families for whom a car is a necessity, not a luxury. Many Opposition Members who do represent rural constituencies—not perhaps as rural as Dudley—have a considerable number of rural


constituents. They represent the counties of Oxfordshire, Buckinghamshire and Gloucestershire, and actually know and understand—

Mr. David Hanson: Scotland and Wales.

Mr. Ruffley: I refer to the hon. Members who are here in their places and not to those who are not.

Mr. Hanson: There are no Conservative Members in Scotland.

Mr. Ruffley: Labour Members representing Scotland and Wales are not in their places at the moment; the hon. Gentleman should listen to what I say.
The fact remains that many lower-income families have smaller, perhaps quite old cars and are not very wealthy by any means, but they need a car to travel large distances. For example, outlying villages in my constituency—those in the Norfolk-Suffolk borders such Hinderclay and Redgrave—are miles away from any nodal transport. That has always been the case. In that part of high Suffolk, for 50 years public transport has not been as good as perhaps it should have been. I do not imagine that it will be any different under this Government, but that is a hard fact of life. The inhabitants there know that they need cars, sometimes more than one car. It is beyond belief that a Government who believe in governing supposedly for the many and not the few can ignore large swathes of the rural populations in Scotland and Wales.

Mr. Clifton-Brown: Will my hon. Friend consider the fact that, if the Government really want to represent rural areas, they should in some way balance the amount of money that they give to rural community bus services with the amount of duty that they raise on petrol?

Mr. Ruffley: My hon. Friend makes an interesting point.

Mr. Bercow: My hon. Friend's charm and courtesy in giving way are well established throughout the House. Does he agree that, if Labour Members representing rural constituencies are to prove that they are independent spirits and not craven lickspittles of the party leadership, they should be prepared to get up and denounce this vicious attack on country dwellers?

Mr. Ruffley: My hon. Friend makes a typically robust and eloquent point. Perhaps the Financial Secretary to the Treasury, once she has finished shuffling through her brief, will be able to take note of his excellent point and reply to it in her winding-up speech. What on earth do the Government think they are doing by raising the escalator in this fashion? What do they think that will do to rural communities and to poorer people who rely on cars as a necessity, not a luxury?
That brings me to the point that my hon. Friend the Member for Cotswold (Mr. Clifton-Brown) raised in relation to public transport subsidies. The £50 million was a gross insult to rural communities. I know that Labour Members may not have many regional newspapers to which they bother sending Walworth road and Mandy

towers press releases, but many of us do take a great interest in what media and newspapers in the shire counties say. They laughed the proposal for £50 million out of court. These are newspapers with no political bias of any description. [Interruption.] If hon. Members think that the East Anglian Daily Times is a party political newspaper, they are more incompetent when it comes to analysing political runes than I thought.
These are independent shire newspapers that take a dim view of the rhetoric of governing for the many, not the few, and of the Government's actions in hammering people who are least able to take on board tax increases of the sort that are outlined in the clause.

Mr. Cranston: Will the hon. Gentleman give way?

Mr. Ruffley: I happily, but reluctantly, give way to the hon. Gentleman.

Mr. Cranston: I thank the hon. Gentleman, perhaps reluctantly, but he took the name of my constituency in vain earlier. Before he draws his remarks to an end, will he say something about the environmental impact? He has gone on for almost 10 minutes and has not mentioned the environment once. Does he agree that transport is the fastest growing contributor to carbon dioxide emissions? Is this measure not one step—one step admittedly—in trying to reduce those emissions?

Mr. Ruffley: As far as I am aware, the Rio targets in relation to carbon dioxide emissions were set under the previous Administration and were well on their way to being hit; indeed, I think that they were hit. Although there is always scope for environmentally friendly taxation, I am not convinced that the case has been made at all for increasing the escalator to 6 per cent. It certainly does not begin to answer the questions that those in shire counties ask about the impact on people who rely on their cars.
Many companies in rural and shire communities have fleets of vehicles. They are concerned about the impact that this unjustified tax hike to 6 per cent. and the increase in diesel will have on their businesses. The hon. Member for North Tayside (Mr. Swinney) made a good point about the impact on village shops and village retail. There is no doubt that this pernicious tax hike will affect people in rural areas. I wish that, in the spirit of openness, the Labour party would—if it is going to play with an even deck on this—admit that this petrol tax hike does cause a problem in rural areas, instead of just ignoring it, pretending that things are all right and using warm words.
The Government certainly have ambitions for a new Britain. They have ambitions to increase the 6 per cent. even more. Many of the business men I know believe that this is only the start of a smash-and-grab raid in future years. It is 6 per cent. this year. What about future years? Conservative Members know that the best way in which to cap and to stop what could be a remorseless attack, particularly on rural areas, through these tax hikes, is to support the amendment.

Mr. Dale Campbell-Savours: I oppose the amendment, because I believe that 5 per cent. is insufficient. I support the Government's position that the figure should be higher.

Mr. Bercow: Six per cent.

Mr. Campbell-Savours: Yes, that is higher than 5 per cent. The hon. Gentleman can count. I congratulate him. I should have gone even higher.
I want to comment on leaded petrol and the distorting effect on petrol prices arising from the profile of taxation. I drove down the Embankment the other day and stopped at the first filling station. It seems to me that a lot of misrepresentation is going on about fuels and fuel prices nationally. That may arise in part because the previous Government provided in legislation for a commitment to a 5 per cent. increase. Fortunately, we have now removed that commitment.
Leaded four-star petrol at that filling station was 73.5p a litre, while super unleaded was 79.5p. As far as the general public are concerned, the reference to unleaded petrol, although it is marked as super, implies that it complies with what we would regard as unleaded criteria. There is a distortion in the way in which such products are being marketed: the public are led to believe that they are buying an unleaded fuel when they are effectively buying a leaded fuel.

Mr. Edward Davey: Most garages selling super unleaded also sell unleaded, which is more commonly bought by consumers and costs less than four-star.

Mr. Campbell-Savours: I understand that, but my point is that super unleaded petrol is regarded by the general public as an unleaded fuel, but it costs 6p more than four-star petrol. Many hon. Members, including myself, will have gone into a petrol station and purchased super unleaded in error, paying 6p more than for four-star leaded, in the belief that we were protecting the environment. The reality is that purchasing the leaded fuel would have done more to protect the environment, because that fuel, as I understand it, is less damaging.
A total misrepresentation is going on at fuel pumps throughout the United Kingdom as to what super unleaded petrol is. My appeal tonight is for people to stop buying it; they are being overcharged and it is probably more damaging to the environment than the leaded four-star petrol, which is a substitute petrol.

Mr. Bercow: I am sorry to learn that the hon. Gentleman incurred that additional cost. Is it not wrong to assume that, simply because he has such poor judgment in those matters, the same can be said of his constituents, who are probably altogether more discerning?

Mr. Campbell-Savours: If only that were the case. My constituents fall into the same consumer trap. Perhaps they are not blessed with the hon. Gentleman's intelligence.
The question of the ceiling and how it is working relates also to diesel. Last week, I spoke about ultra-low-sulphur diesel, which, I am informed, diesel drivers should now use, but which is almost entirely unavailable in the United Kingdom. There are only a few places where it can be bought. I am in favour of as many outlets as possible acquiring the right to distribute it, and selling it at a lower price, but the problem is that they do not have access to it.
I have rung garages in my constituency and further afield in Cumbria, and they tell me that it is almost totally unavailable. My plea to the Government is: please get on to the manufacturers and tell them that the public want it, that taxpayers' interests are served by their buying it, and that the interests of the environment are served by their using it. It should be made available as soon as is humanly or physically possible. We know that the pumping facilities exist on the forecourts, and there is no reason at all why companies should not begin the process of switching pumps from diesel to the new low-sulphur diesel.
When I allude to one other little reform, I hope that you will not rule me out of order, Sir Alan. I know that I am getting right to the margin of your forbearance.
We shall raise additional revenue from the tax increase that is being introduced, and that is welcome for environmental reasons, but there is another way of protecting the environment. We must make sure that people pay: that they get their MOT certificates, pay their road fund duties and insure their vehicles. Why do we not simply have one disc, in three parts, with three different inserts, dealing with vehicle excise duty, MOT and insurance? If we did that, and the date of expiry was marked on each part of the disc, a great number of vehicles, many of which are responsible in the greater part for the pollution that we so deprecate, would immediately be removed from the road.
Many vehicles are on the road that should not be. Let us not only raise taxes but enforce measures that already exist, because my view is that we could thereby be more environmentally friendly.

The Chairman of Ways and Means (Sir Alan Haselhurst): My view is that the hon. Gentleman just about got away with that.

Mr. Edward Davey: I am glad to hear you say that, Sir Alan, because I want to support what the hon. Member for Workington (Mr. Campbell-Savours) said: there are ways in which we can force some of the polluting cars off the road.
I understand that the fines for not having a car properly insured are fairly minimal and that, in some cases, especially for youngsters, whose insurance costs would be significant, they are almost the same as the costs of a decent motor insurance policy. That seems ludicrous, as it offers no incentive to be insured. Increasing the fines might have a similar effect to the proposal of the hon. Member for Workington.
I want to cast the Committee's mind back to the incisive and robust speech of the hon. Member for Bury St. Edmunds (Mr. Ruffley). He focused our minds on a key aspect of the debate: the cumulative effect of the increases in fuel duties. We should think of the increases that have already happened in the past 12 months, because, if we add them to the new increases, as he said, the increase in taxation, over and above what was planned by the previous Government, is up to £9 billion. That significant increase was not foreshadowed in the Labour manifesto.
Cumulatively, the duty on leaded petrol has gone up by 8.9p and on unleaded petrol by 8.4p. For leaded petrol, that is a 21.4 per cent. increase in less than 12 months. As I understand it, the Government's inflation forecast is


about 2.5 to 3.5 per cent. When they increase duty by more than 20 per cent. and claim that the increase is 6 per cent. above inflation on an escalator basis, they seem to be more pessimistic about the prospects for inflation than we have seen in their macro-economic forecasts. The cumulative effect of the two Budgets and two Finance Bills amounts to a swingeing increase.
Unfortunately, the conclusion of the hon. Member for Bury St. Edmunds was weak. He maintained that the amendment went far enough towards rebalancing the injustice of the increase. While Liberal Democrats will be supporting the amendment because it is the only show in town, it does not go anywhere near compensating people who will be affected by the large increase.
The Government are making the mistake of their predecessors. They are being narrow-minded in their approach to environmental taxation. It is important that we build popularity for environmental taxation and build consensus among the population. We shall do that only if people see benefits from the environmental taxes imposed on them. If we are to encourage people to change their behaviour and support those measures that will change their behaviour, we must give them some incentive and some benefit.
7 pm
When the Liberal Democrats impose an environmental levy such as this one, we always propose offsetting measures to protect those on low incomes who have no alternative but to pay the extra tax. We ensure that the environmental measures are revenue neutral and neutral in their effect on the economy as a whole. We have done that rigorously over the years. The hon. Member for Cotswold (Mr. Clifton-Brown) was right when he intervened in the speech of the hon. Member for Bury St. Edmunds. It is important that there are offsetting measures.
The Government have proposed two offsetting measures. One is being implemented quickly. They are making available £50 million a year for rural public transport. As other hon. Members have said, £50 million goes nowhere near compensating rural motorists who will be affected by the increase of more than 20 per cent. in 12 months in fuel duty. The money being raised by the Government is in billions of pounds. Seeing that side by side with £50 million shows that the Government do not accept the principle of offsetting measures. That is a great shame.
The Government have said that they will consult on a second measure. It is not in the Finance Bill, and that is a great shame. They have said that they are minded to consult on introducing vehicle excise duty at a starting rate of £100 for the least polluting cars. I presume that that consultation will happen later this year. It is a shame that it is being delayed, because compensation delayed is not really compensation for people paying higher fuel duties now. The Red Book merely states that the Government are interested in introducing a reduced starting rate of £100. 1 hope that they will go much further.
The Liberal Democrats have argued for some time that vehicle excise duty should be graduated far more than by the suggestions on which the Government propose to

consult. We should like vehicle excise duty for the smaller-engined, more fuel-efficient cars to be reduced to just £10 in order to offset the impact of higher fuel duties, especially on rural motorists who need to use their cars and have no alternative.
The Government should be taking offsetting measures first before imposing these swingeing increases. The timing is of great significance. The right hon. Member for Wells (Mr. Heathcoat-Amory) mentioned the plight of agriculture and the rural economy as a result of the level of the pound and the problems caused by the decline in the beef industry as a result of the BSE crisis. I accept that the BSE crisis is not the Government's fault. I am happy to agree that the Conservative Government failed to tackle that problem sufficiently, but it has left the rural economy in dire straits. So to impose increases in fuel duty on the rural economy when they will be most directly felt and will have the most swingeing impact—increases of more than 20 per cent. in less than 12 months—is clearly a wrong-headed policy. Liberal Democrats will support amendment No. 12 and vote against clause 7 stand part.
In spite of what some Conservative Members have said, the Government have published an environmental assessment of the measures on fuel duty and have given some details of the effect of the increases on the environment. I refer right hon. and hon. Members to page 78 of the Red Book. There is a column on the environmental impact on the reductions in nitrous oxide and various other pollutants. I cannot quite describe it from what is written because it is in scientific shorthand that I do not understand, but the bit that I do understand is where the Red Book states that the fuel duty increases will result in a
Reduction of around 3 billion car kilometres".
However, there is a note saying:
These estimates are subject to significant margins of uncertainty.
I am sure they are. [Laughter.] The Financial Secretary laughs, and she is right to do so.
The more serious point is that that is all that we have—one page; a little line on those massive increases in duty. I am afraid that that does not go anywhere near meeting the promise that the Financial Secretary made recently. Of the promise of a green book setting out the Budget's environmental consequences, she said:
We have every intention of keeping that promise from the first full Budget."—[Official Report, 10 July 1997; Vol. 297, c. 1062.]
In Labour's 1994 pre-election environmental policy paper "In Trust for Tomorrow", it made a commitment to a green book. We have not had it in this Budget. That is a great shame.
We are not able in this Committee to make a proper analysis of the environmental effects of the Government's measures unless the Government start meeting their pledges. So the Liberal Democrats will vote against the Government on amendment No. 12 and clause 7 stand part because the clause will have a damaging impact on the rural economy, and one that has not been offset by alternative measures. The Government have failed to put before the Committee any serious analysis of environmental impact.

Mr. Shaun Woodward: I am in favour of the amendment because I represent a rural constituency.
There is no question but that clause 7 is punitive and cynical and shows that the Government do not understand one bit the needs of rural constituencies. That is the reason for the amendment. The Government do not understand that 75 per cent. of people in rural areas depend on their cars to go to work. They do not understand that rural people have to travel 50 per cent. further than people who live in towns, and that they depend on their cars. Cars for those people are a necessity, not a luxury.
The Government made much of the process of public consultation before the Chancellor's statement. Yet again, that reveals that they are a cynical Government with a cynical practice of public consultation. Had the Chancellor come to my constituency and taken the opportunity to consult businesses in the rural area, he would have seen a survey that we conducted of 300 small businesses. Of those 300 businesses, 97 per cent. told us that they disapproved of the increases last July. The Chancellor would also have discovered that, when asked whether they thought that a 5 or 6 per cent. increase was right, only 1 per cent. of those businesses agreed.

Mr. Leslie: Will the hon. Gentleman give way?

Mr. Woodward: I shall give way in a moment.
When they were asked whether they thought that the increases would be bad, neutral or good, 94 per cent. said that they would be bad.

Mr. Leslie: Will the hon. Gentleman give way on that point?

Mr. Woodward: The hon. Gentleman will have an opportunity in a moment.
Why have the Government imposed that increase, which will hit the elderly, poor and sick in my constituency?

Mr. Leslie: Will the hon. Gentleman give way?

Mr. Woodward: In a moment. I wish to make some progress.
My constituency contains three community hospitals—Burford, Chipping Norton and Witney. The Government, who promise great things on the health service, are to close Burford hospital. The people who use it will have to travel 11 miles to Witney hospital, and those who live in rural areas will have to pay extra money to get there. The Government propose to close 25 per cent. of Witney hospital's beds, so people will have to go on to Oxford. That is a tax that will hit the sick, the vulnerable and those who live in rural areas.

Mr. Leslie: I am grateful to the hon. Gentleman, who is so generous in giving way. He mentioned a survey, which I am sure was statistically and methodologically correct, about the opinions of rural businesses about a 6 per cent. increase in road fuel duty. Did they give an opinion about the 10 per cent. increase in road fuel duty in 1993 which was introduced by Norman Lamont, the former Chancellor?

Mr. Woodward: I am grateful to the hon. Gentleman for his question, because we made it clear that the road fuel escalator was a constructive tax, so long as the market could plan for it. The difference between the previous

Government and this one is that this Government are cynical tax-grabbers who have introduced two increases through the road fuel escalator in 12 months and who are interested only in grabbing money from people's back pockets, front doors and back doors, and now from their car doors.

Mr. St. Aubyn: Does my hon. Friend recall that the previous Government increased petrol duty against a background of significantly falling oil prices? The Government are introducing larger increases when oil prices have bottomed out.

Mr. Woodward: My hon. Friend is exactly right, and it is interesting that the hon. Member for Shipley (Mr. Leslie) has not sought to intervene again. Perhaps he has learnt the lesson that he needs to learn.

Mr. Leslie: I listened carefully to the hon. Gentleman's point and should like an answer. Norman Lamont, the former Chancellor, increased road fuel duty by 10 per cent. in 1993. Was it useful in achieving the hon. Gentleman's objective of helping rural areas?

Mr. Woodward: I am grateful to the hon. Gentleman for asking his question again, because he clearly did not hear what my hon. Friend the Member for Guildford (Mr. St. Aubyn) said. When hon. Members intervene to make what they perceive to be clever comments, they must consider them in context. As my hon. Friend the Member for Guildford said, if Labour Members examined the overall fall in the price of oil and pump prices at petrol stations, they would realise that the Chancellor is hitting the poor, the sick and people in the countryside. The Government do not care about them.

Dawn Primarolo: The hon. Gentleman mentioned the price of oil. Will he comment on BP's reduction of its pump price, which acknowledges the falling price of oil? That did not happen in 1993.

Mr. Woodward: The Financial Secretary makes a valid observation—BP responded to a request from the Chancellor. At a time when petrol prices have been cut in rural communities, it is kind of him to shove petrol prices up left, right and centre.
The Institute of Fiscal Studies has studied a sample of households to discover what the effect of the tax would be. The Government claim to protect the poor, but the IFS has shown that the wealthy will not suffer, because there will be only a 1 per cent. cut in their average living standards. The income of the poorest 10 per cent. will be cut by 2.25 per cent. by this increase alone—so much for a Government whose rhetoric claims that they care about the poor.
The measure is taxation by a Government who promised throughout the election campaign not to raise taxes. They have taken another opportunity to hit the British public in rural communities as hard as they can, which shows that they have no understanding of the needs of the rural economy and people who live in rural areas.

Mr. Geraint Davies: What a load of toffee we have heard from Opposition Members. I draw their attention to an authoritative study published on 3


March, which compared the cost of travel by different modes of transport between 1974 and the present day. The cost of travelling by train has gone up by 68 per cent. and the cost of travelling by bus has gone up by 57 per cent., but the cost of travelling by car has gone down by 7 per cent. The Opposition spin the line that the marginal increase in petrol cost for cars will spiral the economy down into recession and hurt the rural poor. It is complete rubbish.

Mr. Swinney: rose—

Mr. Woodward: rose—

Mr. Davies: I shall give way in a moment, but only after I have provoked three hon. Members at once.
The Government are setting off on a path of environmental sustainability with an holistic view of economic competitiveness in the global economy. Within that wider context, and given that a transport White Paper is forthcoming, the changes should not be interpreted by Conservative Members in such a farcical way.

Mr. Swinney: I am grateful to the hon. Gentleman, who knows that I represent a large rural constituency. I tell him the truth—petrol prices are higher there than in urban areas. He quotes average figures showing that the cost of motoring has come down by 7 per cent., but he must understand that it has come down by more for some people, primarily those in urban areas, and by much less for people in rural areas, who have no alternative to public transport. Will he reflect on the toffee that he is talking?

Mr. Davies: The hon. Gentleman is obviously not a statistician. There is a difference between regional differentials and average rates moving down. At all times there has been a higher price in the countryside, but for virtually everyone there has been a reduction of 7 per cent. in the cost of car use which is geared into the technology of new cars and the depreciating costs of old cars as well as the average cost of fuel.
The Government took a balanced approach in the Budget, which refocuses the burden of taxation on usage rather than on ownership, in the interests of maintaining jobs. A more sophisticated incentive scheme towards sustainability will emerge as the strategy develops. Graduated excise duty will achieve preferential treatment for clean fuels and for clean vehicles, and I hope that there will be more incentives for gas-powered vehicles as part of a wider strategy. Conservative Members shake their heads, but there are 1 million gas-powered cars in Italy and only 4,000 in this country because the previous Government failed to lead the market by setting up a system of incentives in a context within which the economy could adjust to be competitive and environmentally sustainable.
We do not have all the information, because we await the launch of the transport White Paper by my right hon. Friend the Deputy Prime Minister, who will put the issues in the wider context discussed at Kyoto. I support the Government's position. The amendment is myopic and pedestrian, and should be rejected.

Mr. Clifton-Brown: I support the amendment. The increase through the escalator is a real increase, over and

above inflation. The Government's helpful notes on clauses say that this measure alone will increase inflation by 0.28 per cent. Over 10 years, the pure compounding of the inflator will result in an increase of 3.3p per litre; and the actual increase in hydrocarbon duties of 4.4 per cent. a year gives a 44p per litre increase. Adding to that the increase in VAT take—VAT goes on top of the increase in hydrocarbon duties—means that the tax regime that the Government have established for petrol will amount to a staggering 50p a litre over 10 years.
The measure will have a disproportionately injurious effect on certain classes of the community—I am thinking particularly of the low-paid, Mr. Deputy Speaker. It is all very well for us and other groups in the public sector and elsewhere who are able every year to get pay increases that nearly match the rate of inflation; but for those who are low-paid or pensioners, whose incomes do not increase with inflation, it is an especially savage measure. In my rural constituency, Mr. Deputy Speaker, that inflator—

The Chairman: Order. The hon. Gentleman should remember that we are in Committee and that I should not be addressed as Mr. Deputy Speaker.

Mr. Clifton-Brown: I apologise, Sir Alan. I should know better.
The increase of the inflator will have a disproportionate effect on those groups in society who are unable to make up their income to an indexed level. My hon. Friend and neighbour, the Member for Witney (Mr. Woodward), made the point especially well that, to those in rural areas—particularly pensioners and those who are low paid or disabled—the car is not a convenience but a necessity. The Government should think carefully about the regime that they have put in place.
I wish to make one or two points about the environmental effects, Mr. Deputy Speaker, as the Financial Secretary is bound to crow about that aspect when she answers the debate. Some of the claimed environmental effects are dubious, as are the figures on page 75 of the Red Book. I shall ask Sir John Bourn, the Comptroller and Auditor General at the National Audit Office, to use his new powers and new methodology to examine the figures and determine whether or not they are accurate. I suspect, Mr. Deputy Speaker, that those figures are mainly based on the fact of improved technology. Major reductions in carbon dioxide and nitrogen dioxide emissions have come about in the past few years through improved technology such as lean-burn engines and catalytic converters; the reductions have little or nothing to do with fiscal instruments introduced by the Government.
The hour is late, so I shall make only one more point, which is the competitive effect of the inflationary increases on heavy goods vehicles. In coastal areas, we shall find hauliers who have come from the continent with large spare tanks that were filled up on the continent; inland, they will have an unfair advantage over domestic hauliers because of the duties and increases that the Government have wrongly introduced in the Budget. That is why I shall support the amendment.

The Chairman: Order. I hope that, with the assistance of the editors of the Official Report, the hon. Gentleman


will be able to delete all references to Mr. Deputy Speaker, which he continued to make throughout his speech.

Dawn Primarolo: This has been a long debate and, with your guidance, Sir Alan, I should like to deal with both the amendment and the substantive clause in one go, if that would be in order.
The hon. Member for Cotswold (Mr. Clifton-Brown) referred to what he thought would be the likely impact on the retail prices index. I refer him to the answer given in Treasury questions last week, which gave the figures from 1990 on the impact of the escalator and fuel price rises, including the figures relating to the 10 per cent. increase imposed by Norman Lamont, to which my hon. Friend the Member for Shipley (Mr. Leslie) referred. Those figures do not bear out the hon. Gentleman's calculations.

Mr. Clifton-Brown: Will the Financial Secretary give way?

Dawn Primarolo: I should like to make some progress. This has been a long debate and hon. Members are keen to discuss other clauses.

Mr. Clifton-Brown: On a point of order, Sir Alan. I quoted the inflationary rise from the Government's own notes on clauses. Paragraph 12 of the notes on clause 7 states that the impact of the increase on inflation is 0.28 per cent.—

The Chairman: Order. The hon. Gentleman knows that that is not a point of order for me.

Dawn Primarolo: Perhaps the moral of this story is, give way and so avoid a spurious point of order.
The whole point of the Budget, including the increases under clause 4, was that it would be good for Britain. An overwhelming 53 per cent. of the population agreed; they accepted the principles that are now enshrined in the clause. My right hon. Friend the Chancellor is the most popular Chancellor ever after a Budget—Conservative Members obviously lament their failure to achieve such a record in government.
By far the largest number of submissions to the Government in response to the pre-Budget report were in connection with the environment. Those submissions encouraged the Government to make progress on environmental protection, and especially on achieving our targets on carbon dioxide emissions. Opposition Members clearly did not want to refer to the fact that the Kyoto agreement will be legally binding on us. It is an international agreement whereby we have to achieve a reduction in carbon dioxide emissions, and the clause is part of our strategy to do that.

Mr. Malcolm Bruce: Will the Financial Secretary give way?

Dawn Primarolo: The hon. Gentleman chose not to speak in the debate; I shall give way to him later if there is time, but, in fairness to hon. Members who did participate in the debate, I should address their points.
My hon. Friend the Member for Workington (Mr. Campbell-Savours) spoke about market definition in respect of super unleaded, but he appears to have been

misled by the name of that product. He is right to say that there is a higher duty level on super unleaded, but that is because of the damage caused by the much higher benzine emissions. Super unleaded is used by a very small section of the community and is being phased out, as is leaded petrol.
My hon. Friend went on to refer to the availability of ultra low-sulphur diesel—

Mr. Clifton-Brown: Will the Financial Secretary give way? She is wrong again.

Dawn Primarolo: I give way.

Mr. Clifton-Brown: The Financial Secretary might not have understood her brief. The higher the lead levels in petrol, the lower the benzine levels, so super unleaded has a lower level of benzine than ordinary petrol.

Dawn Primarolo: I am clear on the fact that super unleaded contains more carcinogenic compounds. If the hon. Gentleman would care to debate the point with me in the Tea Room tomorrow morning, after I have been to the Select Committee on the Environment, I should be happy to oblige.
My hon. Friend the Member for Workington went on to refer to the availability of ultra-low-sulphur diesel. He is right to say that the Government's strategy of increasing the differential is designed to encourage wider availability of ultra-low-sulphur diesel. However, there has already been improvement: the Sainsbury supermarket chain, which started making ultra-low-sulphur diesel available in response to the previous Government's introduction of the mechanism, now provides it at more than 200 petrol stations and plans to extend that. Obviously, the Government are keen to ensure the availability of that product.
Elsewhere in the Bill, the Government have tightened the definition of ultra-low-sulphur diesel to ensure that the Bill delivers on the environmental objectives that we set out.
The general tenor of the debate seems to be, on the one hand, to complain that the Government have increased the fuel escalator and, on the other, to complain that we have not, and that we are not doing enough, quickly enough, to deal with CO2, emissions and to deliver on the environmental commitments that the Government have and were elected on. For every argument that the escalator is too high at 6 per cent., others are advanced by the environment lobby, to the effect that it is not high enough and that more rapid progress is needed. The Government have sought to strike a balance, so that we deliver on our commitments on CO2, reductions and study the fuels and their emissions to make progress on urban air quality as well as on CO2, emissions.
7.30 pm
Several hon. Members said that there should be a reduced vehicle excise duty rate for rural areas alone, to recognise dependence on cars in rural areas because of the lack of public transport. A specific reduction for rural motorists would be incredibly expensive and cumbersome to administer within the system, but wide open to abuse, because other people could register in rural areas. The Government took the view—confirmed in today's


announcements by my right hon. Friend the Minister of Transport—that we should invest in a transport fund for rural areas.
Hon. Members may complain that that is not enough, but it is a huge increase on the money made available specifically for rural transport projects under the previous Government. The previous Government made available only £1 million. For all their concerns and worries about rural communities, and despite the fact that they had a 5 per cent. escalator—as opposed to our 6 per cent.—they made available only £1 million for rural initiatives, and now they have the cheek to say that we are not doing enough. As many hon. Members said, car owners buy approximately the same amount of fuel regardless of where they live. We have sought to ensure that all car users are making a contribution to the attainment of our environmental objectives.
The United Kingdom is taking a lead internationally in promoting action to reduce greenhouse gases, and duty must be a vital element in that strategy. We have put forward, in the Budget and in the Bill, a duty rate regime that recognises the damage that leaded petrol does, and increases pressure against its use. It recognises the damage that diesel does to the environment, and the need to encourage ultra-low-sulphur diesel, and therefore to adjust the duty rates for those two fuels.
We have ensured that gas oil and heavy fuel oils have increased by the same percentage as petrol and diesel. Duty for fuel gases is frozen again. We are considering commitments to introduce a vehicle excise duty regime that encourages people to have smaller vehicles which are more efficient, less polluting and better for the environment. That consultation is proceeding, but it takes time.
When there was criticism of the escalator, the previous Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), said:
Any critic of the Government's tax plans who claims also to support the international agreement to curb carbon dioxide emissions will be sailing dangerously near to hypocrisy."—[Official Report, 30 November 1993; Vol. 233, c. 939.]
Post Kyoto, to deliver on our commitments, we need to increase the escalator to deliver the cuts in carbon dioxide. We were asked whether it would have an effect. Institute of Petroleum figures show that, in the first nine months of 1997, inland demand for petrol fell. It did so only slightly, but it fell, and the escalator is feeding through into results.
The Government have ensured that the increase in the escalator is part of our environmental objective, and that we have a twin strategy to tackle the problems of transport in rural areas. Amendment No. 12 does not live up to the Conservatives' professed commitment to the environment. They have not told us how they would achieve the necessary reduction in CO2 emissions if the amendment were accepted. Simply, they must decide whether they want to be committed to the environment and the difficult decisions that must be taken to deliver on that commitment, or whether they want to continue to make cheap political points across the Chamber. I had hoped that, given Conservative Members' commitments to the environment when they were in government, they might recognise the importance of this measure in the Government's strategy.
I ask the Committee to reject the amendment, not only because the revenue lost to the Government would be crucial, but because—most important—it would undermine our commitment to reach our CO2 emission target, a Kyoto target which is steep, and, under the Government's commitment to the 20 per cent. reduction in particulates, very demanding. The strategy must start now, and clause 7 makes that start. I urge my hon. Friends to reject the amendment and to support the clause.

Mr. Malcolm Bruce: As the Financial Secretary was not willing to give way to me, I thought that I would speak briefly on the issues.
The Government appear to be making a strong case for increasing the tax in order to deliver what they regard as environmental benefits. It has been powerfully argued that many people in rural areas have no alternative to using the car, so they are obliged to pay more and continue to create the same amount of emissions. The Financial Secretary well knows that transport initiatives between towns and in cities are needed to reduce those emissions, and that, if the extra revenue were diverted to such initiatives, it would make a much more substantial contribution than it will if it is pocketed by the Treasury.
In the unamended version of the Red Book, it was projected that, by the year 2002-03, the escalator effect of the petrol increase would take the Government's receipts as a percentage of gross domestic product to more than 40 per cent.—the highest, apart from one year, that we would ever have achieved.
Two questions hang in the air. First, if the Government are so keen on the environmental benefits, why are they not using the money for the necessary transport? Secondly, if they are arguing that they need the revenue, how come they are finishing the year in which the forecast public sector borrowing requirement of the previous, Conservative, Chancellor was £19 billion in the red, and the out-turn is just under £1 billion? The Financial Secretary tells us that the Government are desperate for the revenue. Obviously, the position is improving, and the Government are simply taking more taxes from the taxpayer, neither offsetting them with tax cuts elsewhere nor delivering measures that would provide real help for people, many of whom have no alternative to the car.
We support amendment No. 12, because the Government must balance their claim that fuel duty is a green tax with real green measures, which will bring about the desired changes; and, potentially, they must offset a reduction in taxes elsewhere for the very substantial extra revenue that they are enjoying.

Mr. Heathcoat-Amory: It is obvious from the Financial Secretary's response to the debate that this tax-raising measure has little to do with protecting the environment and everything to do with increasing the Treasury's tax revenues.
The Financial Secretary has failed to answer our questions about the environmental consequences of the tax increases and the perverse incentives that are being introduced that could, in some cases, damage the environment. She has broken her promise to bring forward an environmental Green Book with the Budget statement. It is up to the Opposition to protect the British people and British industry from a wholly unnecessary and damaging £9 billion tax increase during this Parliament from the


increase in road fuel duties alone. The measure will raise taxes, damage competitiveness and hit all of those who rely on transport. I urge my right hon. and hon. Friend and others to support the amendment.

Question put, That the amendment be made:—

The Committee divided: Ayes 139, Noes 271.

Division No. 259]
[7.40 pm


AYES


Allan, Richard
Jones, Ieuan Wyn (Ynys Môn)


Ancram, Rt Hon Michael
Kennedy, Charles (Ross Skye)


Arbuthnot, James
Key, Robert


Ashdown, Rt Hon Paddy
King, Rt Tom (Bridgwater)


Atkinson, David (Bour'mth E)
Kirkbride, Miss Julie


Ballard, Mrs Jackie
Kirkwood, Archy


Beggs, Roy
Laing, Mrs Eleanor


Beith, Rt Hon A J
Lait, Mrs Jacqui


Bercow, John
Lansley, Andrew


Blunt, Crispin
Leigh, Edward


Brazier, Julian
Letwin, Oliver


Breed, Colin
Lewis, Dr Julian (New Forest)


Browning, Mrs Angela
Lidington, David


Bruce, Malcolm (Gordon)
Lilley, Rt Hon Peter


Burns, Simon
Livsey, Richard


Campbell, Menzies (NE Fife)
Lloyd, Rt Hon Sir Peter (Fareham)


Cash, William
Llwyd, Elfyn


Chapman, Sir Sydney
Luff, Peter


(Chipping Barnet)
MacGregor, Rt Hon John


Chope, Christopher
McIntosh, Miss Anne


Clappison, James
Mackay, Andrew


Clark, Dr Michael (Rayleigh)
Maclean, Rt Hon David


Clarke, Rt Hon Kenneth
Mc Loughlin, Patrick


(Rushcliffe)
Madel, Sir David


Clifton—Brown, Geoffrey
Malins, Humfrey


Collins, Tim
Mates, Michael


Colvin, Michael
Maude, Rt Hon Francis


Cormack, Sir Patrick
Mawhinney, Rt Hon Sir Brian


Cotter, Brian
Michie, Mrs Ray (Argyll & Bute)


Cunningham, Ms Roseanna
Moore, Michael


(Perth)
Morgan, Alasdair (Galloway)


Curry, Rt Hon David
Moss, Malcolm


Dafis, Cynog
Nicholls, Patrick


Davey, Edward (Kingston)
Norman, Archie


Davies, Quentin (Grantham)
Oaten, Mark


Davis, Rt Hon David (Haltemprice)
Prior, David


Day, Stephen
Randall, John


Dorrell, Rt Hon Stephen
Robathan, Andrew


Evans, Nigel
Robertson, Laurence(Tewk'b'ry)


Ewing, Mrs Margaret
Roe, Mrs Marion (Broxbourne)


Fabricant, Michael
Rowe, Andrew (Faversham)


Fallon, Michael
Russell, Bob (Colchester)


Fearn, Ronnie
St Aubyn, Nick


Fox, Dr Liam
Salmond, Alex


Fraser, Christopher
Sanders, Adrian


Garnier, Edward
Sayeed, Jonathan


George, Andrew(St Ives)
Simpson, Keith (Mid—Norfolk)


Gibb, Nick
Spelman, Mrs Caroline


Gillan, Mrs Cheryl
Spicer, Sir Michael


Greenway, John
Spring, Richard


Grieve, Dominic
Stanley, Rt Hon Sir John


Hague, Rt Hon William
Steen, Anthony


Hamilton, Rt Hon Sir Archie
Streeter, Gary


Hammond, Philip
Swayne, Desmond


Hancock, Mike
Swinney, John


Heald, Oliver
Syms, Robert


Heath, David (Somerton & Frome)
Tapsell, Sir Peter


Heathcoat—Amory, Rt Hon David
Taylor, John M (Solihull)


Hogg, Rt Hon Douglas
Taylor, Matthew (Truro)


Horam, John
Taylor, Sir Teddy


Hunter, Andrew
Tredinnick, David


Jack, Rt Hon Michael
Trend, Michael


Johnson Smith,
Tyrie, Andrew


Rt Hon Sir Geoffrey
Viggers, Peter





Wallace, James
Willis, Phil


Wardle, Charles
Wilshire, David


Waterson, Nigel
Winterton, Mrs Ann (Congleton)


Webb, Steve
Woodward, Shaun


Welsh, Andrew
Yeo, Tim


Whitney, Sir Raymond
Young, Rt Hon Sir George


Widdecombe, Rt Hon Miss Ann
Tellers for the Ayes:


Wigley, Rt Hon Dafydd
Mr. John Whittingdale and


Willetts, David
Mr. James Cran.




NOES


Abbott, Ms Diane
Cryer, Mrs Ann (Keighley)


Adams, Mrs Irene (Paisley N)
Cummings, John


Ainger, Nick
Cunliffe, Lawrence


Ainsworth, Robert (Cov'try NE)
Cunningham, Rt Hon Dr John


Alexander, Douglas
(Copeland)


Allen, Graham
Cunningham, Jim (Cov'try)


Anderson, Donald (Swansea E)
Dalyell, Tam


Anderson, Janet (Rossendale)
Darling, Rt Hon Alistair


Armstrong, Ms Hilary
Davidson, Ian


Ashton, Joe
Davies, Rt Hon Denzil (Llanelli)


Atherton, Ms Candy
Davies, Geraint (Croydon C)


Atkins, Charlotte
Dawson, Hilton


Banks, Tony
Dean, Mrs Janet


Barnes, Harry
Denham, John


Bayley, Hugh
Dewar, Rt Hon Donald


Beckett, Rt Hon Mrs Margaret
Dobbin, Jim


Bell, Stuart (Middlesbrough)
Dobson, Rt Hon Frank


Benn, Rt Hon Tony
Donohoe, Brian H


Bennett, Andrew F
Dowd, Jim


Benton, Joe
Drew, David


Bermingham, Gerald
Drown, Ms Julie


Best, Harold
Eagle, Angela (Wallasey)


Betts, Clive
Eagle, Maria (L'Pool Garston)


Blackman, Liz
Edwards, Huw


Blizzard, Bob
Ellman, Mrs Louise


Boateng, Paul
Flynn, Paul


Borrow, David
Follett, Barbara


Bradley, Peter (The Wrekin)
Foster, Rt Hon Derek


Bradshaw, Ben
Foster, Michael Jabez (Hastings)


Brinton, Mrs Helen
Foster, Michael J (Worcester)


Brown, Rt Hon Gordon
Foulkes, George


(Dunfermline E)
Fyfe, Maria


Brown, Rt Hon Nick (Newcastle E)
Gapes, Mike


Brown, Russell (Dumfries)
Gardiner, Barry


Browne, Desmond
George, Bruce (Walsall S)


Burden, Richard
Gerrard, Neil


Burgon, Colin
Gibson, Dr Ian


Butler, Mrs Christine
Godman, Dr Norman A


Byers, Stephen
Godsiff, Roger


Caborn, Richard
Goggins, Paul


Campbell, Alan (Tynemouth)
Golding, Mrs Llin


Campbell, Mrs Anne (C'bridge)
Griffiths, Jane (Reading E)


Campbell, Ronnie (Blyth V)
Griffiths, Nigel (Edinburgh S)


Campbell—Savours, Dale
Griffiths, Win (Bridgend)


Canavan, Dennis
Gunnell, John


Cann, Jamie
Hain, Peter


Casale, Roger
Hall, Mike (Weaver Vale)


Caton, Martin
Hall, Patrick (Bedford)


Chapman, Ben (Wirral S)
Hanson, David


Chaytor, David
Heal, Mrs Sylvia


Chisholm, Malcolm
Henderson, Ivan (Harwich)


Clark, Dr Lynda
Hepburn, Stephen


(Edinburgh Pentlands)
Heppell, John


Clark, Paul (Gillingham)
Hesford, Stephen


Clarke, Charles (Norwich S)
Hinchliffe, David


Clarke, Eric (Midlothian)
Hoey, Kate


Clarke, Rt Hon Tom (Coatbridge)
Home Robertson, John


Clwyd, Ann
Hood, Jimmy


Coaker, Vernon
Hoon, Geoffrey


Coleman, Iain
Hopkins, Kelvin


Cook, Frank (Stockton N)
Howarth, Alan (Newport E)


Cousins, Jim
Howarth, George (Knowsley N)


Cox, Tom
Howells, Dr Kim


Cranston, Ross
Hoyle, Lindsay






Humble, Mrs Joan
Perham, Ms Linda


Hurst, Alan
Pickthall, Colin


Hutton, John
Pike, Peter L


Iddon, Dr Brian
Plaskitt, James


Jackson, Helen (Hillsborough)
Pound, Stephen


Jamieson, David
Powell, Sir Raymond


Jenkins, Brian
Prentice, Ms Bridget (Lewisham E)


Johnson, Alan (Hull W & Hessle)
Prentice, Gordon (Pendle)


Johnson, Miss Melanie
Primarolo, Dawn


(Welwyn Hatfield)
Prosser, Gwyn


Jones, Barry (Alyn & Deeside)
Purchase, Ken


Jones, Helen (Warrington N)
Quin, Ms Joyce


Jones, Ms Jenny
Quinn, Lawrie


(Wolverh'ton SW)
Radice, Giles


Jones, Jon Owen (Cardiff C)
Rammell, Bill


Jones, Martyn (Clwyd S)
Rapson, Syd


Keeble, Ms Sally
Reed, Andrew (Loughborough)


Keen, Ann (Brentford & Isleworth)
Reid, Dr John (Hamilton N)


Kennedy, Jane(Wavertree)
Robinson, Geoffrey (Cov'try NW)


Kidney, David
Rogers, Allan


Kilfoyle, Peter
Rooker, Jeff


King, Andy (Rugby & Kenilworth)
Ross, Ernie (Dundee W)


Kingham, Ms Tess
Roy, Frank


Kumar, Dr Ashok
Ruane, Chris


Lawrence, Ms Jackie
Ruddock, Ms Joan


Laxton, Bob
Savidge, Malcolm


Lepper, David
Sawford, Phil


Leslie, Christopher
Shaw, Jonathan


Levitt, Tom
Sheerman, Barry


Lewis, Ivan (Bury S)
Sheldon, Rt Hon Robert


Liddell, Mrs Helen
Singh, Marsha


Lloyd, Tony (Manchester C)
Skinner, Dennis


Lock, David
Smith, Angela (Basildon)


Love, Andrew
Smith, Rt Hon Chris (Islington S)


McAllion, John
Smith, Miss Geraldine


McAvoy, Thomas
(Morecambe & Lunesdale)


McCabe, Steve
Smith, Jacqui (Redditch)


McCafferty, Ms Chris
Smith, John (Glamorgan)


McDonnell, John
Smith, Llew (Blaenau Gwent)


McFall, John
Spellar, John


McGuire, Mrs Anne
Squire, Ms Rachel


McIsaac, Shona
Steinberg, Gerry


McKenna, Mrs Rosemary
Stevenson, George


Mackinlay, Andrew
Stewart, David (Inverness E)


McNamara, Kevin
Stinchcombe, Paul


McNulty, Tony
Stoate, Dr Howard


Mactaggart, Fiona
Stott, Roger


McWalter, Tony
Strang, Rt Hon Dr Gavin


Mallaber, Judy
Stringer, Graham


Mandelson, Peter
Taylor, Rt Hon Mrs Ann


Marsden, Gordon (Blackpool S)
(Dewsbury)


Marshall, David (Shettleston)
Taylor, Ms Dari (Stockton S)


Marshall, Jim (Leicester S)
Temple—Morris, Peter


Marshall—Andrews, Robert
Thomas, Gareth (Clwyd W)


Maxton, John
Thomas, Gareth R (Harrow W)


Michael, Alun
Tipping, Paddy


Michie, Bill (Shef'ld Heeley)
Touhig, Don


Milburn, Alan
Trickett, Jon


Mitchell, Austin
Truswell, Paul


Moffatt, Laura
Turner, Dennis (Wolverh'ton SE)


Moonie, Dr Lewis
Turner, Dr Desmond (Kemptown)


Moran, Ms Margaret
Turner, Dr George (NW Norfolk)


Morgan, Ms Julie (Cardiff N)
Twigg, Derek (Halton)


Morgan, Rhodri (Cardiff W)
Walley, Ms Joan


Morley, Elliot
Watts, David


Morris, Rt Hon John (Aberavon)
Wicks, Malcolm


Mudie, George
Williams, Rt Hon Alan


Mullin, Chris
(Swansea W)


Murphy, Denis (Wansbeck)
Williams, Alan W (E Carmarthen)


Murphy, Jim (Eastwood)
Wills, Michael


O'Brien, Bill (Normanton)
Winnick, David


O'Brien, Mike (N Warks)
Wise, Audrey


O'Neill, Martin
Wood, Mike


Organ, Mrs Diana
Worthington, Tony


Osborne, Ms Sandra
Wray, James


Pearson, Ian






Tellers for the Noes:



Mr. Greg Pope and



Mr. David Clelland.

Question accordingly negatived.

Clause 7 ordered to stand part of the Bill.

Clause 10

RATES OF TOBACCO PRODUCTS DUTY

Mr. Heathcoat-Amory: I beg to move amendment No. 13, in page 5, leave out lines 24 to 30 and insert—


'1. Cigarettes
An amount equal to 22 per cent. of the retail price plus £75.46 per thousand cigarettes.


2. Cigars
£112.62 per kilogram


3. Hand Rolling tobacco
£87.74 per kilogram


4. Other tobacco products
£49.52 per kilogram.'.


Tobacco is subject to wholly unnecessary extra taxation in this massive tax-raising Finance Bill. Many of the arguments that I might deploy are similar to those that we used in the earlier debate on beer duty, so I shall not go into them in detail, but I shall allude to them.
The same phenomenon of cross-border shopping, combined with escalating illegality, occurs in the smuggling of both alcohol and tobacco. Again, there is evidence of increasing illegality, which is of great concern to the trade in general and smaller tobacconists in particular. All hon. Members who are in touch with trading interests in their constituencies will have been approached in recent weeks by representatives of the legitimate trade. Traders feel threatened and their businesses are undermined by an escalating tide of illegally supplied tobacco goods.
Estimates are inevitably somewhat speculative. The trade quotes a Customs and Excise figure of £690 million having been lost last year to tobacco smugglers. That figure comes from a written reply in Hansard on 17 February 1998 at column 528, so it has certainly been quoted by Ministers. The trade points out that the true figure could be a great deal higher, but, by definition, what is illegal is difficult to measure.
Evidence comes not only from cigarette sales, but from the prevalence on our streets of brands of hand-rolling tobacco that are not legally on sale in this country. There is a brand called Drum, as I recollect from my time in the Treasury, which, as far as I know, is not retailed under that name in this country. Of course, it is possible that smokers legally and legitimately buy it overseas and bring it back, but I am afraid that the bulk of it comes in illegally, as it is easy to compress, hide and smuggle, and it is then resold as contraband.
Another feature of the tobacco tax is that it is not just a matter of known smuggling at ports and airports. There is also a worrying persistence of large-scale duty frauds. That does not involve people stuffing a few packets of cigarettes or hand-rolling tobacco pouches down their trousers and walking through customs; it involves sophisticated gangs who are manipulating a product, the cost of which, when it is legitimately sold, is more than three quarters duty. When the majority of the retail price is made up of duty, that is an invitation to people to take advantage of the situation fraudulently.
That can take the form of cigarettes or tobacco designated for export, on which duty is therefore not paid, finding their way back on to the home market.
Recently The Times reported a haul of 18 million cigarettes, which was intercepted by Customs and Excise investigators at Heathrow. According to the report:
The cigarettes were originally bought for export without duty being paid. Instead the smugglers planned to use the European Union's liberal freight transit controls and a paperwork fraud to divert them on to the domestic market… The result would have been a loss of more than £2.5 million in taxes…
Customs intelligence officers say that gangs have abandoned smuggling drugs such as cannabis and started cigarette operations, because the penalties if they are caught are far lower and the profits are still good.
The trade is therefore characterised by two features: smuggling by individuals and small gangs in vans, and large-scale fraudulent operations by sophisticated gangs. Together, they cost the Revenue large sums and undermine the legitimate trade. The position is getting worse. Not only are the Government putting up duty, but, as noted in our previous debates today, the strong pound has made it that much cheaper to buy abroad.
The trade not only affects the legitimate business, particularly small, high street traders, but has a damaging effect on children. When the cigarettes and tobacco are sold in an uncontrolled market, there is, by definition, no control over who buys them.

Sir Michael Spicer: Before my right hon. Friend leaves the subject of smuggling, is he aware of what is happening in other countries? In Sweden, smuggling has become so bad that, having tried massive indirect taxation on tobacco, the Government have now reduced taxation by 27 per cent. as a direct response to smuggling. I understand that Denmark is thinking of following suit. I hope that my hon. Friend will ask why the Government are not contemplating that, instead of the minor action that they are taking to stop smuggling.

8 pm

Mr. Heathcoat-Amory: My hon. Friend is right. He may have seen the report in the Financial Times on 15 April that Sweden has cut its excise duty on tobacco products by 27 per cent., precisely because it is threatened by cheap imports from its neighbours. We cannot realistically expect other European countries to increase their tobacco duties and close the gap between their rates and ours, as they are threatened by even cheaper supplies, typically from eastern Europe or the Mediterranean countries.
British Ministers sometimes ask countries with lower tobacco duties, such as Germany, to raise them for health reasons and as a useful source of revenue if, for instance, they are trying to comply with the requirements of the Maastricht treaty on the single European currency. They get the response, "We would like to, but we can't, as it would create in our country exactly the same problems that you face from smuggling and cross-border shopping."
There are severe constraints on member states and other countries caused by cross-border shopping and the prevalence of smuggling across what are increasingly open borders. Those who understand market economics realise—and even welcome—the discipline imposed by those constraints. The penalty that is borne by high-tax countries is much more effective than enforced

harmonisation by the European Commission or anyone else. If we step out of line, we pay a penalty through loss of revenue caused by cross-border shopping and increased illegality through smuggling. That is what is happening in Britain. The Government are making a bad situation worse by ratcheting up the duties in pursuit of revenue, despite the evidence of the damage that is being caused.
Before the Government took office, they were apparently aware of that. In an earlier debate, I referred to the Prime Minister's pledge, as Leader of the Opposition, to conduct an urgent, independent and comprehensive study of the issue. However, the Government have not honoured that pledge. Customs and Excise has conducted a review, which the Government are keeping secret, on tobacco and alcohol smuggling, but it has not been published; so it is not the urgent, independent and comprehensive study that was promised; it is a serious broken promise by the Prime Minister.
Will the Financial Secretary make available the report by Customs and Excise? If she is unwilling to do so, will she say why, as it flies in the face of all the assurances from the Government on taking office that they wished to be open and give the public a right to know, that they had nothing to hide and wished to generate a well informed public debate? If they are sincere about that, the very least that they can do if they are not prepared to keep their pre-election promise of an independent review is to publish the one that has already been conducted by part of the Minister's Department.
Who will pay for the extra taxation on tobacco? An interesting ' study has been carried out by London Economics, a group of economists who have taken evidence, assembled information and published a review on the incidence of tobacco duty. It reveals a marked regressivity about the tax.
The report comments on the fact that increasing tax has a deterrent effect on smokers. I always knew that, but I had not realised the extent of it. That is intuitively rather obvious. It points out:
It is mainly the better off (the top thirty per cent of householders by income) who have given up tobacco"—
presumably for other social reasons and pressures. The less well-off have not done so. The report comments that the tax is "extremely regressive" and
becomes more so with each increase in duty.
The report includes research based on the family expenditure surveys for 1995–96 and 1996–97, and reveals that, in the latter of those two financial years,
the poorest ten per cent of United Kingdom households spent almost 14 per cent. of their income on tobacco taxes whilst the richest 10 per cent. spent less than half per cent.
The survey includes non-smokers. If one concentrates entirely on those who smoke, the figures are rather startling. The data suggest that
the poorest ten per cent of smoking households spend as much as a quarter of their income on tobacco compared to a little more than one per cent for the richest.


The report estimates that
savings to consumers from the one-off reduction in VAT on fuel, from eight per cent to five per cent"—
we hear about that constantly from Labour Members—
may have been cancelled out by the first of the planned five per cent real annual increases in tobacco duty.
Not only are the Government taking back what they have given, but they will do so every year, while the reduction in VAT on fuel was a one-off measure.
Perversely, they are encouraging smuggling in a way that does the most damage to the poorest people we represent.
Presumably that worried the Financial Secretary in opposition when she said on 23 January 1995:
We have made clear our views on the health aspects on curtailing smoking and encouraging people not to smoke, but taxation is not the way to do that."—[Official Report, 23 January 1995; Vol. 253, c. 106.]
At that time, she did not feel that ratcheting up taxation on tobacco was a good way of achieving a health objective.

Mr. Leslie: During that debate on 23 January 1995, the right hon. Member for Wells (Mr. Heathcoat-Amory) said:

"Price rises are an effective way in which to reduce consumption"—[Official Report, 23 January 1995; Vol. 253, c. 113.]

Mr. Heathcoat-Amory: That is exactly what I said a few moments ago. Had the hon. Gentleman been listening, he would have heard me quote from a report that reached exactly that conclusion, although it pointed out that price rises had a much greater effect in deterring smoking in better-off households than in poorer households. I am willing to repeat what I said when the hon. Gentleman was nodding off: it is obvious that, if one increases the price of something, people will buy less of it. That is not a particularly remarkable observation. However, the increase does the most damage to poorer households. I am sure that the hon. Gentleman must have constituents on very low incomes who are hit in precisely the way that I described.
The measure is flying in the teeth of a serious law and order issue, whereby smuggled tobacco is resulting in uncontrolled sales to minors, in pubs and clubs and on street corners, and illegally to small tobacconists who sometimes cannot resist the opportunity to buy cheap supplies. All that must worry the Government, who, at least nominally, are committed to law and order.
Our amendment reduces the increases back to 3 per cent. in real terms. I am fully aware that the difference between 3 and 5 per cent. will not cause the difficulties that I have outlined to evaporate, but we are approaching breaking point, and that is why a review is important and why it is disappointing that the Prime Minister's promised review has not taken place. Meanwhile, I urge that the Committee revert to the previous escalator, which will at least avoid the more damaging implications of the Government's present policy.

Mr. Leslie: Listening to the right hon. Member for Wells (Mr. Heathcoat- Amory), one might forget that smoking kills people and that the rate of death and disease from smoking is far too high and needs to come down.

It is essential that people, particularly young people, are deterred from smoking, and we must try to find ways of ensuring that tobacco consumption is reduced.
The new Government's commitment to the 5 per cent. escalator annually is extremely welcome. In 1993, the former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke) said that the tobacco duty escalator
is the most effective way to reduce smoking."—[Official Report, 30 November 1993; Vol. 233, c. 939.]
The higher tobacco duty escalator is widely accepted, certainly in my constituency—I have had no representations opposed to the 5 per cent. escalator—as necessary in the wider public interest for health and public protection.
If we can stop people smoking, we can consider redirecting resources currently used within the NHS for treating tobacco-related illnesses to other health care priorities. This fiscal measure is central to the Government's approach to public health and protection. In 1994, the then Minister of State, Department of Health, the right hon. Member for North-West Cambridgeshire (Sir B. Mawhinney), pointed out:
every 10 per cent. increase in price—
of tobacco—
produces about a 3 per cent. to 6 per cent. decrease in consumption."—[Official Report, 11 February 1994; Vol. 237, c. 617.]
That is an important example of cause and effect. One cannot compare VAT on fuel with tobacco duty, because heating is good for people and tobacco consumption is bad. The right hon. Member for Wells was wrong in that regard.
The annual escalator is a serious and strong deterrent. It is not an astronomical amount. It is a fair but firm amount, and it strikes the right balance in preventing the smuggling of excessive amounts of tobacco. There are more effective ways of dealing with that issue. In particular, the Government can reinforce the work of Customs and Excise and its officers while discouraging people from this harmful habit.
Conspicuous by its absence from the contribution of the right hon. Member for Wells was the cost to the Exchequer of the Opposition's amendment. The House of Commons Library tells me that £180 million would have to be found from public finances if the amendment were accepted. We hear nothing about where that money will come from. Would the Opposition cut public services, or raise taxes in another way?

Mr. Heathcoat-Amory: I am a little disappointed that the hon. Gentleman is raising this matter again, because I answered him earlier. The amendment simply marginally reduces the impending surplus, which is beyond what even the Government expected in the current financial year. Therefore, there is no need to find expenditure from elsewhere in the Government's programme.

Mr. Leslie: The right hon. Gentleman is effectively saying that he would borrow more money.

Mr. Heathcoat-Amory: No, it will come from the surplus.

Mr. Leslie: If we get into surplus we can consider that, but effectively the Opposition are looking at putting that amount on the PSBR.


We have heard nothing from the Opposition about how they will make up that lost revenue. The amendment is poorly thought out and, moreover, it is not in the interests of public health and the wider need to protect people's health throughout Britain.

Mr. Edward Davey: The hon. Member for Shipley (Mr. Leslie) makes a telling point. Conservatives call for reductions in taxes on tobacco and beer. When they produce a costed set of accounts to put before the country, we shall be interested to see whether they include these policies—and to know the British people's reactions to those priorities.
The Liberal Democrats were highly critical of the Government during the previous debate, but the Government have got clause 10 about right. The right hon. Member for Wells (Mr. Heathcoat-Amory) talked about smuggling, and we heard about that in an earlier debate. It is clear from the figures for revenue lost and revenue evaded that one of the major problems is the smuggling of hand-rolling tobacco.
8.15 pm
The right hon. Member for Wells did not discuss the Government's proposals in that regard, but the Government have, rightly, frozen duties on hand-rolling tobacco, and that is pertinent to our earlier debate when the hon. Member for Beckenham (Mrs. Lait) questioned the source of my figures. I can give the detailed reference for them. They were from a press notice issued by HM Customs and Excise on 26 September 1997 entitled "Smuggling of alcohol and tobacco".
The breakdown of those figures makes it clear where the real problem lies for Customs and Excise. The £950 million that has been referred to today is made up primarily of losses on smuggled hand-rolling tobacco. In 1997, £540 million of revenue was evaded and £540 million lost. Of £950 million, more than half is accounted for by the smuggling of hand-rolling tobacco. Contrary to what we have heard from Conservative Members, the Government are freezing duty and cutting in real terms the excise duties on the products that are the focus of smuggling activity. I applaud the Government, therefore, because they have got the measure about right.
In comparison, the loss resulting from the smuggling of cigarettes and other tobacco products is £145 million. That is a significant amount; it is a worry and Customs and Excise needs to be more effective in tackling that loss. If one compares that loss of £145 million, however, with the loss of £540 million from hand-rolling tobacco, it is clear that the Government have analysed the problem and put forward a sensible solution. Therefore, the Liberal Democrats will support clause 10 and oppose the amendment. However, we hope that the Government will rigorously analyse the workings of Customs and Excise. I shall not detain the Committee by repeating my earlier argument, but it is probably even more important with regard to tobacco than to alcohol products.
The hon. Member for Shipley referred to the link between tobacco duties, and health. If anything, we would have supported the Government in further increasing tobacco duties with the one caveat that the resources thereby raised should be earmarked to go directly into the health service. That might have breached the spending limits inherited from the previous Government, but my

constituents, and the constituents of many Labour Members, would not have worried about that. They would have welcomed extra cash for the health service, because it would have brought down waiting lists.
Every week, I receive letters from constituents, many of them elderly, who are being told by Kingston hospital that they will have to wait a little longer for their operation. The staff at Kingston hospital are working their hardest to reduce those waiting lists—and I congratulate them on their hard work—but, despite their best efforts, the lack of cash and the cuts, inherited from the previous Government but nevertheless severe, are affecting the standard of living of my constituents who are having to wait many months for operations for conditions that are causing them great pain.
If the Government had proposed to increase tobacco duty even more than they have done, and had put the money straight into the health service to tackle waiting lists, they would have had even more support than we are prepared to give them. Their overall strategy is right, but if they want to find other measures to solve public spending problems—although, with the massive war chest that they are amassing, there cannot be too many such problems, and they could have found resources elsewhere—they could use that route to try to sort out the mess in which the Conservatives left the national health service.

Mrs. Lait: I am somewhat uneasy in this debate on tobacco because I am not a smoker—I loathe smoking—and I believe that the most effective policy is a high tax policy. The problem is that the level of smuggling and bootlegging means that we do not have a high tax policy. Trying to get organisations such as Action on Smoking and Health, and the Government, to recognise that we do not have such a policy is a bit like beating one's head against a brick wall, but I will continue to do so in the hope that eventually the penny will drop.
I am concerned that the Treasury does not grasp the scale of the problem. The Financial Secretary is aware, because she answered them, that I have tabled a series of questions on tobacco and alcohol smuggling and bootlegging. I was chilled by the apparent lack of interest in grasping the problem.
I have asked questions about what action the Government are taking in their EU presidency to try to end the subsidy to tobacco farmers and what progress they are hoping to make in ECOFIN. I have also asked Departments to estimate the number of people whose benefits have been withdrawn because they were found to be smuggling and bootlegging. I have asked the Driver and Vehicle Licensing Agency what has happened to licences, and cars and vans involved in smuggling and bootlegging. I have asked how many licences have been withdrawn from licensed premises because they were retailing smuggled and bootlegged goods.
I accept that not all those issues are the responsibility of the Financial Secretary, but answers have come there none, so it is difficult for the Treasury, let alone the poor Back Bencher, officially and graphically to describe the effects of smuggling.
I found in the Red Book an interesting point, which I followed up with a question to the Financial Secretary, about the forecast excise receipts. They showed that, for both alcohol and tobacco duties, the Treasury was


expecting a reduction in income of £100 million in each case. I sent the Financial Secretary a note asking whether she could explain that, and answer has come there none, so perhaps the Treasury does not understand what is happening.
Other organisations—for example, customs, which is on the front line—know exactly what is happening and are trying hard to cope. An incident in Dover in October was reported in the Sunday Mirror, which said that Customs made a raid in which
the bootleggers fled as £70,000 of illegal booze and cigarettes were seized. But after a heavy drinking session at a nearby pub, the gang returned … and tried to get their haul back. 'We were cataloguing everything we had seized, when the smugglers stormed the place,' said one Customs official.
The history of smuggling and bootlegging immediately brought to mind a parallel situation in 1747, when smugglers tried to regain bootlegged goods in the Poole customs house. We are reverting to what happened 200 years ago, and there are strong parallels to show what should be the proper response.
The police have conducted an analysis of people involved in smuggling and bootlegging whom they have caught. They are not members of big gangs, but poor mules. The analysis shows that 90 per cent. of those involved are unemployed and drawing benefit, so the Department of Social Security should be able to answer my questions. Seventy per cent. of those involved have a criminal record; 40 per cent. are from outside Dover; 25 per cent. of crimes such as burglary and car theft in the Dover area—

The Chairman: Order. The amendment does not relate specifically to smuggling. The hon. Lady must relate her remarks specifically to the proposals in the amendment relating to the duty on tobacco.

Mrs. Lait: Indeed, Sir Alan, I will. I accept your guidance, but I am trying to build up a case to show why the amendment will help to reduce smuggling.

The Chairman: Perhaps the hon. Lady should accelerate the build-up.

Mrs. Lait: I will, with pleasure.
The police have analysed the problem, and it cannot be beyond the wit of the Treasury to do so.
Another point of which the Government have made great play and with which I have great sympathy is the effect on health of increased smoking. High levels of duty mean that, when youngsters can get hold of cheap tobacco, they are likely to do so. I asked the Library for information about the worrying increase in the number of young smokers. We must remember that the single market started on 1 January 1993. The number of young smokers peaked in 1984 and dropped until 1988. Between 1988 and 1993, the figure was stable. In 1996, the level of smoking among youngsters was as high as it had been in 1984. I suggest that, although there are complex reasons why youngsters smoke, there is a clear correlation between the opening of the single market and the subsequent availability of cheap tobacco, and the number of youngsters who smoke.
All those factors show the need to deal with the problem caused by the high levels of taxation of tobacco. As my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) said, the problem is worsening. There has been a noticeable increase in the smuggling and bootlegging not only of hand-rolling tobacco, which the hon. Member for Kingston and Surbiton (Mr. Davey) mentioned, but of cigarettes.
Dave West, who runs the Smoking Warehouse in Adinkerke in Belgium, said that before last December's rise in cigarette prices, he was selling a negligible number of cigarettes. He is now describing what happened on 1 December as a gold rush, and he is looking forward to his second gold rush this December.

Mr. Cranston: Can the hon. Lady explain the results of a 1996 MORI survey, which showed that the preferred cigarette brand among young people was Benson and Hedges—the most expensive—and that consumption by young people was attributable more to advertising than to smuggling, which was not even considered in the survey?

Mrs. Lait: The hon. Gentleman may care to know that the cost of UK cigarette brands from Dave West is £1.80. Compared with the cost in the UK, that has a much more significant effect on people's consumption of cigarettes than advertising. As I have already been called to order on the issue of smuggling, I dare not go down the route of the advertising debate.
I shall draw my remarks to a close in the hope that some of the information that I have provided to the Financial Secretary will bring home to her the scale of the problem of tobacco smuggling and bootlegging. We need a clear policy on reducing the profit from smuggling and bootlegging tobacco. The policy that affects duty on tobacco in this country comes from Belgium, not from the British Government, and we need to take that fact into account when thinking about how to deal with the problem of the nation's health.
I shall sum up by quoting Adam Smith, who was a customs commissioner. He said:
The high duties which have been imposed upon the importation of many different sorts of foreign goods, in order to discourage their consumption in Great Britain, have in many cases served only to encourage smuggling; and in all cases have reduced the revenue of the Customs below what more moderate duties would have afforded.
I hope that the Financial Secretary will put in train some of the inquiries surrounding the broader issue of the health of the nation, which have been brought about by high tobacco duties, and look favourably on our amendment.

Dawn Primarolo: The right hon. Member for Wells (Mr. Heathcoat-Amory) ignores all the health arguments and proposes that, to help the poor, the escalator on cigarettes should be reduced from 5 per cent. to 3 per cent.
As my hon. Friend the Member for Shipley (Mr. Leslie) said, the health consequences of smoking are at the heart—if hon. Members will excuse the pun—of our strategy. It is worth reminding the right hon. Member for Wells—who clearly needs reminding—of them. Some 80 per cent. of the 40,000 deaths from lung cancer each year are attributed to smoking, and 20 per cent. of the


180,000 deaths from heart disease each year and 80 per cent. of the 30,000 deaths from bronchitis, chronic obstructive airway diseases and other types of illness are attributed to smoking. There is a 20 per cent. higher risk of death to babies born to mothers who smoke. Women who smoke run a ten times higher risk of heart attack, stroke or cardio-vascular disease, and smoking may affect fertility.
We know that babies born to mothers who smoke are lighter, and that paternal smoking also makes babies lighter through passive smoking once the baby is born. Smokers lose, on average, more than one day of their life each year. About half of all regular smokers in developed countries are eventually killed by cigarette smoking. The growth in smoking among teenagers and young adults has a dramatic impact on their life expectancy. The risk of dying from lung cancer is associated with the length of time a person smokes, as well as with the amount that he or she smokes. Even when a person has given up smoking, the consequences to his or her health remain higher than for those who have never smoked. That is the context in which the Government set their policy of raising the escalator on cigarettes and tobacco products excluding hand-rolling tobacco.
Opposition Members referred to smuggling. I take your guidance, Sir Alan—this is not the subject of the clause—and I do not intend to speak at length on it. The Government recently announced their intention to deal with persistent offenders, to ensure that more people face disqualification from driving and that the criminals who smuggle pay compensation for the revenue evaded through smuggling. Publicans and off-licence and restaurant owners could, after prosecution, find their liquor licences revoked.
I cannot give the hon. Member for Beckenham (Mrs. Lait) answers about the consequences of those actions, because the Conservative Government did not pursue such policies. I feel a little frustrated by today's debate because Conservative Members cannot, or perhaps will not, understand that this Government have a strategy that their Government failed to put in place. We should be clear about the scale of the problem. The right hon. Member for Wells pointed out that the Government of which he was a member were committed to using taxation as part of their health policy. The then Secretary of State for Health repeatedly referred to the importance of taxation in deterring people from smoking. I agree that it is important, but it should not be done in isolation. We need health education and strategies to ensure that not only tax but other methods are used to encourage people not to start smoking or, if they already smoke, to stop.
The hon. Member for Beckenham referred to reducing smoking among young people. We absolutely agree with her about the importance of that. The Government's strategy moves in parallel with our tax strategy to reduce smoking among young people. It is set out in detail in the tobacco control White Paper, which will be published later this year. Opposition Members complain that we have not done enough in 12 months, not that we are moving in the wrong direction. I presume that tonight's discussion is to fill up time on the Floor of the House rather than to make genuine suggestions about an alternative strategy.
I shall not be tempted to discuss whether Opposition Members care about the poor. It is an insult to poor people that, having been in power for 18 years, Conservative

Members have only just noticed that they exist and that taxation policies have an impact on them. The right hon. Member for Wells was a Minister in both the Foreign Office and the Treasury. His sudden discovery that policies might impact on the poor is breathtaking. Where has he been, not to have noticed after all this time the impact that the Conservative Government's policies had on the poor?
The hon. Member for Kingston and Surbiton (Mr. Davey) spoke about the importance of freezing duty on hand-rolling tobacco. We are continuing to pursue our policy with regard to cigarettes, but recognise that, as part of the strategy that we are developing to tackle smuggling, there are special problems with hand-rolling tobacco.
May I say to the hon. Member for Beckenham that the idea that those engaged in smuggling are poor mules, feckless people or Jack the lads is ridiculous. People who buy goods from smugglers put money in the back pockets of criminals and deny revenue to the Treasury, which means that it cannot be spent on public services. Instead of advocating that the Treasury should cut moneys available to public services by cutting duty rates, the hon. Lady should join us in decrying the criminal activity of smuggling and encourage and support the Government's action.

Mrs. Lait: May I ask the Minister to add to her reading list some books about smuggling in the 18th and 19th centuries? That would indicate to her the solution to the problem. "The Albion Tree", one of the best, is available in the House of Commons Library.

Dawn Primarolo: If the hon. Lady is seriously telling me that smuggling has been around for a very long time, I must say that I agree with her. If she is saying that we need complex strategies to tackle it, I also have to agree with that. However, I would encourage her to find a solution in this century rather than seeking refuge in the past. She might pay a little more attention to the strategies that the Government are deploying rather than lamenting the fact that we are not behaving as if we were in the 17th century: I leave that to her hon. Friends.
Several points were made about the Swedish Government's announcement on 14 April that they intend to reduce duty on cigarettes by 27 per cent. in 1999. They will achieve that by reducing specific rates. I was asked why we do not take similar action in the United Kingdom. First, we would lose £2.4 billion in a full year, which is the equivalent of l½p on the basic rate of income tax. We are not prepared to countenance the loss of that revenue.
Secondly, I do not know the hon. Lady's position on Europe, but she seemed to imply that we should allow other member states to determine our duty rates. She prayed in aid the Swedes' activities in reducing their rates, as did the right hon. Member for Wells. That is a solution to their problem, but information from Customs and Excise and the tobacco industry suggests that the problem of smuggling in Sweden is much greater than the problem here, much as we regret our own. Customs and the Tobacco Manufacturers Association are discussing reliable methods of trying to estimate the overall scale of cigarette smuggling—a problem that, as the hon. Lady and others have said, is beginning to emerge.
In the light of our earlier debate on beer duty, it frankly beggars belief that the hon. Lady and others say that we have no enthusiasm for tackling smuggling and the


problems that it causes. Imported cigarettes and smuggling are a problem not only for the UK and other European Union member states with high-duty regimes; they are also a problem for those with low-duty regimes. The hon. Lady's causal connection between duty and smuggling is not a fair representation of the complexity of the problem.
The Government have made it clear that, on health grounds, our policy is correct. We have given more money to the health service than we would have done by linking the escalator to money moved across to the health service, as the hon. Member for Kingston and Surbiton suggested we should. I remind him that the Government have already given an extra £2 billion to the national health service. Our commitment to funding health and education is clear, in terms of priorities.
I ask the Committee to reject the amendment, which would reduce duty to 3 per cent., and to support the duty of 5 per cent. and our phrasing on hand-rolled tobacco, as they are the best ways to deliver the Government's health policy. That would recognise that we are dealing vigorously with the problems of smuggling and will not allow that criminal activity to continue to undermine public expenditure and public revenue.

Mr. Heathcoat-Amory: We have heard the Financial Secretary at her worst. She either could not or would not answer our questions. I remind her that she said in the House in 1995—I gave the quotation earlier—that increasing taxation is not the way to reduce consumption of tobacco or to deal with the health effects.
I asked the hon. Lady what had caused her to change to her mind. Switching from Opposition to Government has clearly had an extraordinary effect on her attitudes. Apparently she now thinks that there is no way of dealing with this problem other than by increasing prices and taxation.
It has occurred to my hon. Friends and me that the Government have changed their mind on another way of tackling tobacco consumption—through advertising. The Committee will remember that the Labour party won the election on a clear pledge to stop advertising on formula one racing cars. The Prime Minister changed his mind, and broke that pledge. It was later discovered that Bernie Ecclestone, who persuaded him to do so, had given £1 million to the Labour party. Lucky old Bernie got his bung back on that occasion, but we are left with a broken promise and the fact that the much heralded ban on tobacco advertising has not come into effect. Perhaps that is why the Government are relying more on increasing duty on tobacco.
My knowledgeable hon. Friend the Member for Beckenham (Mrs. Lait) has drawn attention to the seriousness of the smuggling or bootlegging problem and the culture of illegality to which it has led. The Financial Secretary said that she was concerned about that, but she clearly is not grappling with the problems. The proposed increases widen the gap between continental rates of duty and our own, which will make the situation worse.
The Financial Secretary said that there was a problem of young people taking up smoking, and, during our debate, other hon. Members have recognised the

seriousness of that problem. If tobacco products are smuggled in, they are made available outside Government controls on the sale of tobacco to minors. It is an unruly and anarchic market, and it leads to young people taking up smoking. For that pure health reason alone, the Government ought to think twice before increasing the escalator to 5 per cent.
Opposition Members have shown how savagely regressive this policy is. The Financial Secretary appeared entirely ignorant of that. If she did recognise it, she seemed entirely uninfluenced by it. We conclude that the Government's concern about the poor and those on low incomes is entirely synthetic. The figures 1 quoted earlier showed that smoking households in the bottom decile spend up to a quarter of their income on tobacco products. That ought to worry members of a party that, until fairly recently, had at least a published concern for the needy and the disadvantaged.
My final point, which the Financial Secretary continues to avoid, is that the Prime Minister recognised, before the election, that there was a problem. He said so when he was looking for votes in the tobacco industry and related industries. He promised an independent, urgent and comprehensive study. He has broken that promise. When will the hon. Lady publish the substitute study, by Customs and Excise, to inform our debates, and the public, about the real facts behind the Government's taxation policy, which is driven entirely by revenue considerations? The health issue is purely a smokescreen; it is revenue that the Government are after. If they disagree, let them publish a report on the matter.

Mr. Patrick Hall: Will the right hon. Gentleman give way?

Mr. Heathcoat-Amory: The hon. Gentleman has not contributed to the debate, and I do not propose to give way to him. In any case, it is not from the hon. Gentleman that I shall get an answer to the following question, because he is not in a position to give one. When do the Government intend to fulfil their pre-election promise, on which the hon. Gentleman and others stood, to undertake an investigation of this issue and publish the results? Until that happens, we shall conclude that the clause is revenue-driven. I urge the Committee to accept our amendment.

Question put, That the amendment be made:—

The Committee divided: Ayes 106, Noes 303.

Division No. 260]
[8.50 pm


AYES


Ancram, Rt Hon Michael
Clarke, Rt Hon Kenneth


Arbuthnot, James
(Rushcliffe)


Atkinson, David (Bour'mth E)
Clifton—Brown, Geoffrey


Beggs, Roy
Collins, Tim


Bercow, John
Colvin, Michael


Blunt, Crispin
Cormack, Sir Patrick


Brazier, Julian
Cran, James


Browning, Mrs Angela
Curry, Rt Hon David


Burns, Simon
Davies, Quentin (Grantham)


Cash, William
Davis, Rt Hon David (Haltemprice)


Chapman, Sir Sydney
Dorrell, Rt Hon Stephen


(Chipping Barnet)
Duncan Smith, Iain


Chope, Christopher
Evans, Nigel


Clappison, James
Fabricant, Michael


Clark, Rt Hon Alan (Kensington)
Fallon, Michael


Clark, Dr Michael (Rayleigh)
Fox, Dr Liam






Fraser, Christopher
Moss, Malcolm


Garnier, Edward
Norman, Archie


Gibb, Nick
Paice, James


Greenway, John
Prior, David


Grieve, Dominic
Randall, John


Hamilton, Rt Hon Sir Archie
Robathan, Andrew


Hammond, Philip
Robertson, Laurence (Tewk'b'ry)


Heald, Oliver
 Roe, Mrs Marion (Broxbourne)


Heathcoat—Amory, Rt Hon David
Rowe, Andrew (Faversharn)


Hogg, Rt Hon Douglas
Ruffley, David


Horam, John
St Aubyn, Nick


Hunter, Andrew
Sayeed, Jonathan


Jackson, Robert (Wantage)
Simpson, Keith (Mid—Norfolk)


Jenkin, Bernard
Spelman, Mrs Caroline


Johnson Smith,
Spicer, Sir Michael


Rt Hon Sir Geoffrey
Spring, Richard


Key, Robert
Stanley, Rt Hon Sir John


King, Rt Hon Tom (Bridgwater)
Steen, Anthony


Kirkbride, Miss Julie
Streeter, Gary


Laing, Mrs Eleanor
Swayne, Desmond


Lait, Mrs Jacqui
Syms, Robert


Lansley, Andrew
Taylor, John M (Solihull)


Leigh, Edward
Taylor, Sir Teddy


Letwin, Oliver
Tredinnick, David


Lewis, Dr Julian (New Forest E)
Trend, Michael


Lidington, David
Tyrie, Andrew


Lilley, Rt Hon Peter
Viggers, Peter


Lloyd, Rt Hon Sir Peter (Fareham)
Wardle, Charles


Luff, Peter
Waterson, Nigel


Lyell, Rt Hon Sir Nicholas
Whitney, Sir Raymond


MacGregor, Rt Hon John
Widdecombe, Rt Hon Miss Ann


McIntosh, Miss Anne
Willetts, David


MacKay, Andrew
Wilshire, David


Maclean, Rt Hon David
Winterton, Mrs Ann (Congleton)


McLoughlin, Patrick
Woodward, Shaun


Madel, Sir David
Yeo, Tim


Malins, Humfrey
Young, Rt Hon Sir George


Mates, Michael
Tellers for the Ayes:


Maude, Rt Hon Francis
Mr. John Whittingdale and


Mawhinney, Rt Hon Sir Brian
Mr. Stephen Day.




NOES


Abbott, Ms Diane
Breed, Colin


Adams, Mrs Irene (Paisley N)
Brinton, Mrs Helen


Ainger, Nick
Brown, Rt Hon Nick (Newcastle E)


Ainsworth, Robert (Cov'try NE)
Brown, Russell (Dumfries)


Alexander, Douglas
Browne, Desmond


Allan, Richard
Bruce, Malcolm (Gordon)


Allen, Graham
Burden, Richard


Anderson, Donald (Swansea E)
Burgon, Colin


Anderson, Janet (Rossendale)
Burstow, Paul


Armstrong, Ms Hilary
Butler, Mrs Christine


Ashdown, Rt Hon Paddy
Byers, Stephen


Ashton, Joe
Cable, Dr Vincent


Atherton, Ms Candy
Caborn, Richard


Atkins, Charlotte
Campbell, Alan (Tynemouth)


Ballard, Mrs Jackie
Campbell, Mrs Anne (C'bridge)


Banks, Tony
Campbell, Menzies (NE Fife)


Barnes, Harry
Campbell, Ronnie (Blyth V)


Bayley, Hugh
Campbell—Savours, Dale


Beckett, Rt Hon Mrs Margaret
Canavan, Dennis


Begg, Miss Anne
Cann, Jamie


Beith, Rt Hon A J
Casale, Roger


Bell, Stuart (Middlesbrough)
Caton, Martin


Benn, Rt Hon Tony
Chapman, Ben (Wirral S)


Bennett, Andrew F
Chaytor, David


Benton, Joe
Chidgey, David


Bermingham, Gerald
Chisholm, Malcolm


Best, Harold
Clark, Dr Lynda


Blackman, Liz
(Edinburgh Pentlands)


Blizzard, Bob
Clark, Paul (Gillingham)


Boateng, Paul
Clarke, Charles (Norwich S)


Borrow, David
Clarke, Eric (Midlothian)


Bradley, Peter (The Wrekin)
Clarke, Rt Hon Tom (Coatbridge)


Bradshaw, Ben
Clelland, David





Clwyd, Ann
Hopkins, Kelvin


Coaker, Vernon
Howarth, George (Knowsley N)


Coleman, Iain
Howells, Dr Kim


Cook, Frank (Stockton N)
Hoyle, Lindsay


Cotter, Brian
Humble, Mrs Joan


Cousins, Jim
Hurst, Alan


Cox, Torn
Hutton, John


Cranston, Ross
Iddon, Dr Brian


Cryer, Mrs Ann (Keighley)
Jackson, Helen (Hillsborough)


Cummings, John
Jamieson, David


Cunliffe, Lawrence
Jenkins, Brian


Cunningham, Rt Hon Dr John
Johnson, Alan (Hull W & Hessle)


(Copeland)
Johnson, Miss Melanie


Cunningham, Jim (Cov'try S)
(Welwyn Hatfield)


Cunningham, Ms Roseanna
Jones, Barry (Alyn & Deeside)


(Perth)
Jones, Helen (Warrington N)


Dafis, Cynog
Jones, leuan Wyn (Ynys MÖ)


Dalyell, Tam
Jones, Ms Jenny


Darling, Rt Hon Alistair
(Wolverh'ton SW)


Davey, Edward (Kingston)
Jones, Jon Owen (Cardiff C)


Davidson, Ian
Jones, Martyn (Clwyd S)


Davies, Rt Hon Denzil (Llanelli)
Keeble, Ms Sally


Davies, Geraint (Croydon C)
Keen, Ann (Brentford & Isleworth)


Dawson, Hilton
Kennedy, Charles (Ross Skye)


Dean, Mrs Janet
Kennedy, Jane (Wavertree)


Denham, John
Kidney, David


Dewar, Rt Hon Donald
Kilfoyle, Peter


Dobbin, Jim
King, Andy (Rugby & Kenilworth)


Dobson, Rt Hon Frank
Kingham, Ms Tess


Donohoe, Brian H
Kirkwood, Archy


Dowd, Jim
Kumar, Dr Ashok


Drew, David
Lawrence, Ms Jackie


Drown, Ms Julia
Laxton, Bob


Eagle, Angela (Wallasey)
Lepper, David


Eagle, Maria (L'pool Garston)
Leslie, Christopher


Edwards, Huw
Levitt, Tom


Ellman, Mrs Louise
Lewis, Ivan (Bury S)


Ewing, Mrs Margaret
Liddell, Mrs Helen


Fearn, Ronnie
Livsey, Richard


Flynn, Paul
Lloyd, Tony (Manchester C)


Follett, Barbara
Llwyd, Elfyn


Foster, Rt Hon Derek
Lock, David


Foster, Michael Jabez (Hastings)
Love, Andrew


Foster, Michael J (Worcester)
McAllion, John


Foulkes, George
McAvoy, Thomas


Fyfe, Maria
McCabe, Steve


Gardiner, Barry
McCafferty, Ms Chris


George, Andrew (St Ives)
McDonnell, John


George, Bruce (Walsall S)
McGuire, Mrs Anne


Gerrard, Neil
McIsaac, Shona


Gibson, Dr Ian
McKenna, Mrs Rosemary


Godman, Dr Norman A
Mackinlay, Andrew


Godsiff, Roger
McNamara, Kevin


Goggins, Paul
McNulty, Tony


Golding, Mrs Llin
McWalter, Tony


Griffiths, Jane (Reading E)
Mallaber, Judy


Griffiths, Nigel (Edinburgh S)
Mandelson, Peter


Griffiths, Win (Bridgend)
Marsden, Gordon (Blackpool S)


Gunnell, John
Marshall, David (Shettleston)


Hain, Peter
Marshall, Jim (Leicester S)


Hall, Mike (Weaver Vale)
Marshall—Andrews, Robert


Hall, Patrick (Bedford)
Maxton, John


Hancock, Mike
Michael, Alun


Hanson, David
Michie, Bill (Shef'ld Heeley)


Harvey, Nick
Milburn, Alan


Heal, Mrs Sylvia
Moffatt, Laura


Heath, David (Somerton & Frome)
Moonie, Dr Lewis


Henderson, Ivan (Harwich)
Moore, Michael


Hepburn, Stephen
Moran, Ms Margaret


Heppell, John
Morgan, Alasdair (Galloway)


Hesford, Stephen
Morgan, Ms Julie (Cardiff N)


Hinchliffe, David
Morgan, Rhodri (Cardiff W)


Hoey, Kate
Morley, Elliot


Home Robertson, John
Morris, Rt Hon John (Aberavon)


Hood, Jimmy
Mudie, George


Hoon, Geoffrey
Mullin, Chris






Murphy, Denis (Wansbeck)
Smith, John (Glamorgan)


Murphy, Jim (Eastwood)
Smith, Llew (Blaenau Gwent)


Oaten, Mark
Spellar, John


O'Brien, Bill (Normanton)
Squire, Ms Rachel


O'Brien, Mike (N Warks)
Steinberg, Gerry


O'Neill, Martin
Stevenson, George


Organ, Mrs Diana
Stewart, David (Inverness E)


Osborne, Ms Sandra
Stinchcombe, Paul


Palmer, Dr Nick
Stoate, Dr Howard


Pearson, Ian
Stott, Roger


Perham, Ms Linda
Strang, Rt Hon Dr Gavin


Pickthall, Colin
Stringer, Graham


Pike, Peter L
Swinney, John


Plaskitt, James
Taylor, Rt Hon Mrs Ann


Pope, Greg
(Dewsbury)


Pound, Stephen
Taylor, Ms Dari (Stockton S)


Powell, Sir Raymond
Taylor, Matthew (Truro)


Prentice, Ms Bridget (Lewisharn E)
Temple—Morris, Peter


Prentice, Gordon (Pendle)
Thomas, Gareth (Clwyd W)


Primarolo, Dawn
Thomas, Gareth R (Harrow W)


Prosser, Gwyn
Tipping, Paddy


Purchase, Ken
Touhig, Don


Quin, Ms Joyce
Trickett, Jon


Quinn, Lawrie
Truswell, Paul


Radice, Giles
Turner, Dennis (Wolverh'ton SE)


Rammell, Bill
Turner, Dr Desmond (Kemptown)


Rapson, Syd
Turner, Dr George (NW Norfolk)


Reed, Andrew (Loughborough)
Twigg, Derek (Halton)


Reid, Dr John (Hamilton N)
Tyler, Paul


Robinson, Geoffrey (Cov'try NW)
Wallace, James


Rogers, Allan
Walley, Ms Joan


Rooker, Jeff
Watts, David


Ross, Ernie (Dundee W)
Webb, Steve


Roy, Frank
Welsh, Andrew


Ruane, Chris
Wicks, Malcolm


Ruddock, Ms Joan
Williams, Rt Hon Alan


Russell, Bob (Colchester)
(Swansea W)


Sanders, Adrian
Williams, Alan W (E Carmarthen)


Savidge, Malcolm
Willis, Phil


Sawford, Phil
Wills, Michael


Shaw, Jonathan
Winnick, David


Sheerman, Barry
Wise, Audrey


Sheldon, Rt Hon Robert
Wood, Mike


Singh, Marsha
Worthington, Tony


Skinner, Dennis
Wray, Jarnes


Smith, Angela (Basildon)
Tellers for the Noes:


Smith, Miss Geraldine
Mr. Clive Betts and


(Morecambe & Lunesdale)
Mr. John McFall.

Question accordingly negatived.

Clause 10 ordered to stand part of the Bill.

Clause 11

RATES OF GAMING DUTY

Mr. Michael Fallon: I beg to move amendment No. 14, in page 5, line 33, leave out subsection (1) and insert—
'(1) In the Table in section 11(2) of the Finance Act 1997 (rates of gaming duty) the figures in the left-hand column under the heading "Part of gross gaming yield" shall be increased on 1 April each year in line with the increase in the retail index of prices over the previous twelve months.'.

The Second Deputy Chairman of Ways and Means (Mr. Michael Lord): With this, it will be convenient to discuss amendment No. 15, in page 5, line 39, leave out '£1,500,000' and insert '£3,500,000'.

Mr. Fallon: We now turn to gaming. Perhaps it is appropriate, as the night draws on, that we turn to the

tables. I would not suggest for a moment that you are an habitué of any other table than that at which you are presiding, Mr. Lord. However, you may not be aware, as the rest of the Committee may not be aware, that gaming is a big industry in Britain. There are 115 casinos in this country, 21 of which are in London. The industry employs 12,000 people, one third of whom are employed in London.
Gaming is not just a big industry, but a successful one that attracts overseas visitors and earnings to Britain. Gross overseas receipts last year were £879 million. The industry contributed £141 million to the public revenues in tax in 1996-97.
When we were in office, we recognised the success of the industry. In the latter part of our time in government, we did not propose the increases in duty contained in the clause to which our amendment is addressed. On the contrary, we proposed a programme of sensible deregulation. I declare an interest as an unpaid member of the Government's deregulation task force, which, from 1995, sought to make it easier for casinos to open in new areas and to modernise the industry, allowing advertising and making it easier for people to be members of casinos. Above all, we treated the industry with respect.
This Government have changed that. Without warning, they have slapped a £25 million increase on gaming duty. The industry calculates that the figure may be nearer to £30 million. I see the Paymaster General nodding. I am glad to see him confirm that the Government's figures may be wrong on that. By nodding, he has proved my point. The increase has been slapped on the industry arbitrarily.
For £3 million casinos, the increase in duty is 12 per cent. For £5 million to £12 million casinos, the increase is about 50 per cent. For £20 million casinos, the increase is 30 per cent. The top rate of duty has been upped by 40 per cent. There is no logic behind the progressive increases in duty. This is a dawn raid with a vengeance.

Mr. Gardiner: I stand to be corrected by the record, but I believe that the hon. Gentleman said that the duty was being upped by 40 per cent. I trust that he meant upped to 40 per cent. from the old rate of 33.33 per cent.

Mr. Fallon: Subsection (2) increases the top rate of duty to 40 per cent. I am talking about the various bands in subsection (1). The increases are varied and arbitrary, depending on the size of yield. The increase could be 12 per cent., 50 per cent., 30 per cent. or 40 per cent. In the middle bands, the increase is around 50 per cent. An arbitrary, illogical, irrational increase has been foisted on the industry.
The industry was not consulted. It was not informed or warned, and there was no discussion of the issue. I am doubly grateful that the Paymaster General is here this evening. When we were discussing corporation tax yesterday, he lectured us on the importance of consultation. He said:
I regret to tell him that the Opposition have to learn that the Government—as we will discuss later when we come to individual savings accounts and other matters—are prepared to consult, to listen and to change policy, as we have done. That is nothing of


which we should be afraid or ashamed. We recommend that the Opposition learn from that."—[Ofcial Report, 27 April 1998; Vol. 311, c. 66.]

Mr. Robert Ainsworth (Lord Commissioner to the Treasury): Hear, hear.

Mr. Fallon: The Whip says, "Hear, hear," but there was no consultation, no warning and no proper discussion with the industry on gaming duty before the tax was suddenly imposed. Indeed, it is suggested not only that the industry was not informed but that the Home Office, the industry's sponsoring Department, was not aware of the proposed increases until the Budget was announced. All that from a Government who claim to be pro-business. We read in our copies of the Evening Standard on Friday that there might be further tax cuts for business, but tonight we are debating a clause that imposes a tax increase on business. Casinos across the country were pole-axed on Budget day.
Just in case the Paymaster General or the Financial Secretary does not quite realise what he or she is doing, I shall lay out for them the effect on the two biggest operators in London. There are 21 casinos in London, and 10 of those are controlled by only two groups: London Clubs International and the Capital Corporation. Within days of the Budget announcement, 30 per cent. of the value of their share prices was wiped out. That was the effect of this arbitrary, irrational, cack-handed attempt to grab more revenue from the casino industry.
I do not want to hear any excuse from Government Front Benchers in response to our amendments, or any suggestion that duties may be higher elsewhere in Europe—they may be higher. Other casinos in Europe—perhaps the Paymaster General knows some of them—have fewer invigilators, and pay their staff in tips rather than salaries.
On amendment No. 14, I do not want to hear the Financial Secretary say—if I can have her attention—that we did not index gaming duty. We did not have to. We understood the industry; indeed, we were proposing a programme of deregulation to help it. We were not in the business of suddenly slamming on a 40 per cent. increase in gaming duty.
The amendments offer the Financial Secretary a way out. Amendment No. 15 would reverse one of the most damaging increases. Amendment No. 14 would index duties for ever. At least then the industry would know where it stood. It would be protected from dawn raids in future; it would not suddenly face an arbitrary increase. [Interruption.] I am surprised that Ministers find the matter funny when 12,000 jobs are at stake. Amendment No. 14 would index increases so that there could be no temptation for Ministers suddenly to impose quite savage, arbitrary and ill-thought-out increases in duty.
Apart from those two suggestions out, there are plenty of other ways out of the impasse. I understand that various talks are going on between the industry and officials, who now accept the ill-thought-out nature of the Financial Secretary's proposals. The other ways out include phasing the various increases—if she really insists on them—over three years. It is not often that an industry that is suddenly taxed by a so-called business-friendly Government sees 30 per cent. of its value wiped out on the stock exchange. There is a case for phasing the increases over three years.

Perhaps the Financial Secretary will admit that the various banding increases have not been worked through properly. She might be prepared at least to look at the way in which the increases impact.
In the end, it is up to the Financial Secretary. She must decide how to justify inflicting such increases on one of our most successful British businesses. If she does not, the industry will know that similar increases may be levied each consecutive year. The industry attracts a considerable amount of overseas earnings, which could quite easily pass over to Amsterdam, Frankfurt or any of the European capitals with which the Paymaster General is so familiar. If the Financial Secretary does not listen, it will be clear that she is not prepared to defend this industry, and that she regards it as some kind of milch cow for future tax revenue.
Amendment No. 14 gives some protection and puts the industry beyond the grasp of the Financial Secretary. It will ensure that future duty increases are only ever linked to the annual rate of inflation. That kind of safeguard was not necessary during our term of office, but it is certainly necessary now.

Sir Teddy Taylor: We have just discussed a series of measures to give the Government more cash from taxing alcohol, hydrocarbon oil, tobacco and other items. The Government will receive a great deal of extra cash, which I hope they spend wisely. I hope, in this case, that the Financial Secretary will agree to have a second look. I want to persuade her that the proposal is irrational and unfair, and will seriously affect jobs.
In my constituency, leisure and recreation are major employers. The Financial Secretary will know that we have quite high unemployment—about 9 per cent. When we try to encourage the sea-front to do better and to invest some money, it makes a big difference. We have received investment recently which we hope will help but, in general, the problems with employment in seaside towns are serious.
I have two casinos in my constituency, located at the Westcliff sporting club. I should like the Financial Secretary to think about some figures which have been sent to the Chancellor of the Exchequer. The club's duty for last year was £563,000. The club has calculated what it would pay under the new proposals; it says the figure would be £876,000, an increase of 56 per cent. These figures are either right or wrong, but on the basis of my discussions with people at the club, I think they will be right.

Mr. Fallon: It sounds as if the casino in my hon. Friend's constituency is a middle-ranking casino in terms of income, and he is describing an increase of more than 50 per cent.—the information provided to the House of Commons. I can assure him that that sounds right. Middle-ranking casinos in the capital or the provinces are facing increases of more than 50 per cent.

Sir Teddy Taylor: My hon. Friend is absolutely right. The way in which the tax will apply will not impose a straight increase of a certain amount, but one which varies from place to place. In Southend, we have one of those middle casinos. I have never had the opportunity of


playing in it, but I have seen around it. Those in charge appear to be good employers who appear to run a good business.
In a seaside town—where things can be tough and where unemployment tends to be high—it seems irrational to impose the increase. In London clubs—where exciting people come from overseas countries, and where they appear to be wealthy—one might see that there is an opportunity to get more tax. It seems rather unfair on an organisation that has spent an enormous amount on investment and is a major employer in our area.
The second point that I hope the Financial Secretary will bear in mind is that, in taxing alcohol and cigarettes, the increase can be passed on to the customers. There is simply no way in which casinos can do that. It might be possible in the long term for the club to put up the amount one pays to become a member, but even that amount will be limited.
Thirdly, the Financial Secretary should be aware that the company is a substantial employer. The Westcliff sporting club provides an academy which trains 150 persons a year. It has had little co-operation from the authorities in providing what it regards as a major public service. It also pays a substantial amount in value added tax; as you know, Mr. Lord, casinos have to pay VAT even on bad debts, which are not recorded.
I appreciate that there have always been some doubts in the House of Commons about the validity of casinos. Some people think that, like smoking, casinos are a bad thing which should be banned. Of course, they have a perfectly good case. Others think that casinos should be encouraged. However, as we have these activities, it seems desperately unfair to impose massive sudden tax increases and to apply them in such a way that particular casinos in particular areas are hit particularly hard. Such a massive increase is unfair on Southend-on-Sea.
We are already very restrictive in the case of casinos. For example, unlike other industries, we do not allow them to advertise. As the Financial Secretary is also aware, this tax is not on profits, but on gain before costs.
I appreciate that Governments who want to get a lot of money sometimes look around for obvious targets—the sort of thing about which people might not complain—but the basic question is: is the Financial Secretary confident that this extra money can be secured without jobs being destroyed, without some casinos having to close and without some reduction in the industry?
If the industry is simply a sitting duck with lots and lots of money everywhere, one can appreciate that the Government may have a case, but I have a feeling that they have gone too strong on this one and that they have introduced it in such a way that it is particularly unfair to particular places. Of course, I feel very upset that Southend seems to be hit harder than other areas. I hope that the Financial Secretary will examine that.
What can the Financial Secretary do? I appreciate that, in such debates, it is unusual for Ministers to say that they are going to overturn their decisions and change the Budget. However, I hope that she will say that she will examine the impact of the tax as it applies to particular areas, or at least that she has open mind on how the measure might be applied. Changes can be made if things are unfair.
I appreciate that, like all Governments—goodness knows, I had plenty of arguments with the previous one—the Government do some bad and some good things, and sometimes make mistakes because they are under a lot of pressure. I feel that, in this case, a mistake has been made. Unfairness has been introduced and I therefore hope that the Financial Secretary will say that she will reconsider the matter and at least keep an open mind on what is a serious issue for the people of Southend-on-Sea.

Mr. Edward Davey: Until earlier today, my personal knowledge of the casino industry was, to say the least, limited. I am not someone who is taken with gambling. I may be the only hon. Member who has yet to buy a national lottery ticket. That is not, I hasten to add, because I have something against gambling; I do not wish gambling to be banned. It is more because, as a modern economic man, I take my decisions on a rational basis, and it is clearly irrational to gamble. It is only justified as a consumption good. Some people like the experience of gambling and want to spend money on it. That is fine for them, but I choose not to.
There are concerns when gambling becomes an addiction; that is why this and past Governments have sought to regulate the gambling industry. However, in this measure, the Government are not showing particular social concerns. People who use casinos, particularly London casinos, are international gamblers who cross the globe to gamble. I do not think that the Government's aim is to help those people with their gambling problem. It is clear that the Government want to raise revenue; that is the main point of the measure. However, they are going about it in the wrong way.
As other hon. Members have said, this is a large increase in a very short time. That is a bad way in which to introduce any new tax and, for the casino industry, it is particularly bad. It will affect a small number of businesses very severely immediately. As the hon. Member for Rochford and Southend, East (Sir T. Taylor) has said, it will result in people losing their jobs. That will happen not just in constituencies such as his and those of my right hon. and hon. Friends who have coastal constituencies where there are casinos for tourists, but in London. I have constituents who work in the casinos in central London, and they are concerned that the tax may lead to their losing their jobs.
As the hon. Member for Rochford and Southend, East said, it is difficult for the tax to be passed on. I have had to refer to other sources to understand that, because tax increases can often be passed on to the consumer. Apparently, the edge that the house has over the player is laid down by law, ranging from between 0.6 and 5.6 per cent. in blackjack to between 1.5 and 5.6 per cent. in dice, so the tax cannot be passed on.
To recoup their investment, the business owners will have to make efficiencies elsewhere. Their main costs are staff and property, so staff will be made redundant. That causes a problem for the underlying commercial health of casinos, because it is important for the industry to have in-built inefficiencies. To attract people into the casinos in one capital city rather than another, they have to have subsidised food and lots of people pandering to the punters' every need. Laying off staff may undermine casinos' long-term health.
The other danger is that gambling could be driven underground. The Gaming Act 1968 was supposed to prevent mafia-type underground gambling operations,


with all their appalling implications. I am sure that the Government are not trying to push gambling back that way, but such a huge increase in so short a time could lead in that direction.
The Government are in danger of killing the goose that lays the egg. Revenues may decrease in the medium term, as casinos close or high-income gambling operations go out of the regulated sector.
We shall oppose the Government and support the amendment. I am sure that the Government will defeat the Opposition's combined efforts, so I shall propose an alternative that they should grasp, in the form of the improvements in the regulatory regime to which the hon. Member for Sevenoaks (Mr. Fallon) alluded.
In the dying days of the previous Government, the Home Office published some sensible proposals in a document, "Second Consultation on Casino Deregulation", which would have been implemented in the unhappy event of the Conservatives being re-elected. The proposals would have made it easier for people to apply for membership of a casino on the night or by post, and enabled casinos to market their services in a limited way. There are huge restrictions on what casinos can and cannot advertise, and the proposal was for very minor deregulation. The consultation process revealed little opposition to that, and I believe that it should be pressed ahead with.
The casino industry and the previous Government supported other minor deregulatory measures, such as allowing up to three slot machines per table in casinos and extending the "permitted areas" in which casinos can operate. They were minor deregulations, but they would have significantly helped the industry. In response to the paper, the Gaming Board re-emphasised to the previous Government that those changes were likely to lead to a substantially enlarged industry. So my point to the Minister is that, if the Government intend to tax the casino industry in this way—as they are likely to do come the 10 o'clock Division—they should reconsider the consultation paper and those deregulatory proposals.
I do not think that an enlarged casino industry would cause any major social problems. There are many other aspects of the gaming industry in which those problems could be looked at. The deregulatory proposals would enable the casino industry to take the effect of higher taxes in its stride and still grow and meet the extra impost that the Government seek to levy tonight. That would mean that the scenario that I have painted would not occur, and that the revenues of the Government would not fall in the medium term.
9.30 pm
Amendment No. 21 in my name and that of my hon. Friends was tabled not in relation to casinos but to flag up to Ministers the fact that the extra duty on amusement machines in clause 12 will cause great problems to working men's clubs and non-profit-making organisations. We want to flag that up before the Bill goes into Committee Upstairs because we want the Government to pay attention to it. We do not intend to move the amendment tonight, but we want the Government to take cognisance of our concerns about that clause. We hope that the Government can put to the Committee some alternative proposals.
We intend to oppose the Government tonight. The extent of this latest tax increase and the speed at which the Government are proceeding with it almost beggars belief. It is a massive increase in a very short time. The only way in which the Government can ensure that it does not damage the casino industry in the immediate future, let alone the medium term, is to come to the House at the earliest opportunity with some significant deregulatory proposals.

Mr. Andrew Lansley: I am grateful for the opportunity to speak in this brief but none the less useful and important debate on the impact of clause 11 on the casino industry. Those who have listened to the debate or who come to read it in days ahead may regard us as a remarkably abstemious crew. I share the position of the hon. Member for Kingston upon Thames—am I right?

Mr. Davey: And Surbiton.

Mr. Lansley: I beg the hon. Gentleman's pardon. I had the right part of the world, but not the right constituency. The hon. Member for Surbiton.

Mr. Davey: Kingston and Surbiton.

Mr. Lansley: I doubly beg the hon. Gentleman's pardon. I have been wrong twice. I shall go for a third time in a minute.
The hon. Gentleman said that he had not bet in a casino, indeed not bet anywhere. I have to say that I am not so abstemious. I buy a national lottery ticket from time to time. I recall that, in the debate on the National Lottery Bill, plenty of Labour Members said that they did not buy a lottery ticket but were happy to spend the proceeds in diverse ways. I suspect that, similarly, the Government are perfectly happy, whether or not they are players in casinos, to tax them and spend the money.
I declare a former interest, in the sense that, in a previous employment, I had occasion to advise Ladbrokes and the Betting Offices Licensees Association. In that context, I wrote a short pamphlet on the regulation of the gaming industry—the betting and gaming industry, I should say, lest I offend it—which meant that, for that short moment, I understood something of the industry. As you may be aware, Mr. Lord, the trouble with debates in the House of Commons is that it is not at the moment that one understands something that one is invited to comment on it. I have had to relearn some of the things that I once understood about the casino industry.
The change from 33.33 to 40 per cent. in the top rate of duty seems steep on first impression, but it is only when one begins to put it alongside the change in the bandings that one begins to realise what the overall impact is. The hon. Member for Brent, North (Mr. Gardiner)—I am pleased that he is in his place—may have the chance to help me, because I am not competent, least of all without a calculator, to work out the effective increases in the average rate of duty caused by the change in banding combined with the change of the top rate for given levels of gross gaming yield in casinos.
The exchange between my hon. Friends the Members for Rochford and Southend, East (Sir T. Taylor) and for Sevenoaks (Mr. Fallon) made it clear that the effective


increase is quite steep, even for middle-range casinos, but more significant is the impact on the marginal rate. Under the changed banding structure, a modest gross gaming yield of £2 million in the half year might lead to a marginal rate of duty of 25 per cent. as opposed to 12.5 per cent.
At the margin, tax often acts on incentives, and its impact on cash flow affects the viability of the business. The hon. Member for Kingston and Surbiton (Mr. Davey) was right to mention the inability to pass on to players the costs of such a tax; they will come straight off the bottom line, so it was not surprising that the share price reacted in such an alarming fashion. My hon. Friend the Member for Sevenoaks was right to draw attention to that. I hope that Ministers were also alarmed and that they did not foresee the consequences. If they foresaw them, they should have reconsidered the impact of the measure.
We should also consider the scale of the measure. The previous top rate of duty—33.33 per cent.—would have applied at £5.4 million of gross gaming yield in the half year. The new figure of £2.9 million is a little over half the previous level. The two changes have perniciously been introduced together. It would have been better to leave the banding structure in place and to apply more straightforwardly the duty that the Government think is required to raise additional revenue, if it was indeed necessary to raise it.
For casinos, the duty is not a tax paid in isolation and instead of other tax; it is paid in addition to VAT, corporation tax and modest licence fees. From the British Casino Association survey of the third quarter of 1997, I derived the figure of £141 million, so the industry pays a handsome sum to the Exchequer before the Exchequer has its further pound of flesh.
I take account of what my hon. Friend the Member for Rochford and Southend, East said, but the burden of my argument is that the impact of the measure is disproportionately skewed towards London casinos and larger casinos. Duty was previously paid in proportion, 15 per cent. by provincial casinos and 85 per cent. by London casinos. The duty increment proposed by the Government will be paid 3 per cent. by provincial casinos and 97 per cent. by London casinos.
There are two points of significance in that. First, the Government thought that they were aiming at a soft target and that the additional charge would be levied on London casinos with overseas players or players who are UK-based, but not UK nationals—people who do not form a political constituency. Secondly—the consequence that the Committee should find worrying—is that, in so far as the duty is levied on London casinos, the impact falls disproportionately on overseas players who bring substantial earnings to this country.
I approach the subject not as one who is principally interested in the structure of the betting and gaming industry, although I have an interest in that, but as one who is concerned about trade and industry matters. In the trade context, it is extraordinary that, at the moment when sterling is high and it is difficult for casinos, the tourist industry and London to maintain their attractiveness to those who have to change their money to sterling to spend it in this country, the Government think it right and appropriate to impose swingeing increases that damage

the relative competitiveness of the London casinos—which are important contributors to our overseas earnings—and have a particular impact on certain groups of individuals of high net worth who operate in an internationally mobile environment.
Is it any wonder that we have seen press reports—I have no knowledge as to whether they are well founded—that speculate about London clubs decamping to Las Vegas for their headquarters and operations? That would be entirely retrograde. When discussing the London casinos, we are speaking not only about significant benefits in terms of overseas earnings but about individuals who, while in London, are likely to be significant contributors to earnings of foreign exchange via hotel accommodation, investment and consumption expenditure.
My hon. Friend the Member for Sevenoaks referred to the overseas earnings figures, which are impressive: £880 million overseas source receipts in 1997, of which the London casinos—those that benefit most substantially from overseas visitors—took in £160 million. It is worth noting that, if the United Kingdom's casinos were rendered into one company rather than one industry, their overseas earnings would put them into the top 100 exporting companies in this country. That is a measure of their value. I see the Paymaster General is interested in this point.

Mr. Fallon: He likes big numbers.

Mr. Lansley: Then perhaps he will be interested in these numbers: not only would those earnings put the casinos into the league of the top 100 exporting companies, but they employ a larger number of employees—11,720 in the most recent survey I have read—than, for example, Vauxhall Motors. I know that the Paymaster General has taken a close personal interest in the future of Vauxhall at Luton, so it would be retrograde were he not to take an equally close interest in the financial and competitive health of this country's casino industry, which, like the motor manufacturing industry, is a direct contributor to our overseas earnings.
There is a tendency to talk about the importance of manufacturing, but I learned from Keith Joseph at the Department of Trade and Industry that what we really need to focus on is the internationally tradeable sector. Because of its revenue earnings from overseas sources, the casino industry in this country is a significant internationally tradeable sector, on which the measure that the Government are proposing could have a significant and damaging impact.
The measure has three retrograde aspects. It is on the wrong scale at the wrong time for an industry that makes a significant contribution to our balance of payments. Only this morning, I was hearing about the record monthly level of adverse balance of payments running on our current account, but the measure we are discussing will do nothing to help in that respect. However, the measure is focused on the London casinos and their appeal to an overseas and internationally mobile group of people—the, from memory, about 220,000 overseas members of London casinos. No doubt those people make a substantial but unquantified further contribution to our overseas earnings and to the tourism and other earnings of the United Kingdom economy.
As my hon. Friend the Member for Sevenoaks forcefully and rightly argued, the measure was proceeded with without consultation with the industry—potentially, I suspect, without the Treasury's adequate foreknowledge of its implications, and perhaps even without proper consultation with Government about its likely impact and whether it was desirable in industry terms.
The industry will be right to look to the Committee to ameliorate the measure. Amendments Nos. 14 and 15 would help to do so, especially No. 15, which proposes a change in the banding structure. With justification, the industry would look to the Government to take account of the obvious and severe adverse impact of the measure, and would look for transitional provisions—not least because of the present high level of sterling. It will hope that the Government will, this time, listen to the debate and propose, at a later stage, some measures of their own to relieve the adverse impact. I support the amendment.

Mr. Gardiner: Ornipathology has never been my strong point, but when the hon. Member for Kingston and Surbiton (Mr. Davey) complained about the death of the goose that laid the egg, my heart did not bleed. Anxiety has been expressed in Committee tonight about the way in which the proposals may affect employees in the industry. I have received from my constituents—whom I have told that I would raise the issue tonight—letters addressed to "Dear … ", saying:
I am writing in connection with the serious threat posed to the London casino industry and particularly to my employer"—
I shall not name the employer, for fear of encouraging more high rollers to visit the establishment—
by the proposed increases in gaming duty announced in the Chancellor's recent budget.
These proposals have serious implications for jobs within the casino industry in London.
Those were the cyclostyled letters that I received. Let us now examine how serious the implications are for jobs in the casino industry in London.
We heard from the hon. Member for South Cambridgeshire (Mr. Lansley), correctly, that 3 per cent. of the effect of the measure would apply to provisional casinos—

Mr. Lansley: Provincial.

Mr. Gardiner: I am sorry. We have heard that 3 per cent. of the effect would apply to provincial casinos and 90 per cent. to the London casinos. I believe that that effectively deals with the intervention by the hon. Member for Eastbourne, showing that the bulk of the measure is aimed at London casinos.

Sir Teddy Taylor: First, I am not the MP for Eastbourne. Apart from that, the proposed increase would require casinos in my constituency to pay more than an extra £300,000 in duty, which is a lot of money and amounts to an increase of 56 per cent. It cannot be said, therefore, that the increase does not matter; it matters a great deal to the medium casinos.

Mr. Gardiner: The facts are clear. A 2.5 per cent. tax rate is being levied on the casino's gross gaming yield—

its gross profit—up to £400,000. In the middle bracket, which we are discussing, we are talking about between £400,000 and £2.9 million. That is the gross profit that those organisations are making.

Mr. Lansley: Will the hon. Gentleman give way?

Mr. Gardiner: I am afraid that I must press on because of time. In usual circumstances I would give way, but I think the hon. Gentleman will agree that we must keep our comments short before a 10 o'clock closure.

Mr. Lansley: There is no closure.

Mr. Gardiner: I will press on.
On the impact that these measures are likely to have on jobs in the industry, I cannot conceive that the additional levies will be passed on to employees, the cost of whom is minute in comparison with the profits that these companies make.
The hon. Member for South Cambridgeshire referred to problems that might arise with the balance of payments and his concerns about overseas earnings. He said that he did not want to deter the high rollers from coming to London and frequenting London casinos. As the hon. Member for Kingston and Surbiton pointed out in his arguments about the edge that must be applied, those costs will not be transmitted to the high rollers because they are limited by the edge that the casinos are allowed, by law, to charge.

Mr. Lansley: The hon. Gentleman referred to gross gaming profit, but he will realise that it is in fact gross gaming yield. I argued not that the players—"high rollers" is a pejorative term—will be deterred by a change in the edge, but that the casinos might have to contemplate the relative competitiveness of operating in London compared with other locations.

Mr. Gardiner: That is a spurious argument. London is an international centre, and any major casino that can locate here will want do so in order to get its market share in situ. London will not suddenly be denuded of casinos as a result of this measure.

Mr. Fallon: The hon. Gentleman represents a London constituency. Is he seriously defending a sudden increase—introduced without warning—of 40 per cent. on the duty that top London casinos will bear? How can he, as a London Member, say that casinos in London will be unaffected and will sail on, competing on an equal footing with casinos in Amsterdam or Frankfurt, while bearing an unexpected increase of that kind?

Mr. Gardiner: I want to nail the statement that the hon. Gentleman has now made twice in the Chamber. He has claimed that there is an increase of 40 per cent. I am sorry, but the duty will increase from 33.33 per cent. for the top rate to 40 per cent. According to my mathematics, that makes an increase of 6.7 per cent. It is important to appreciate that the top band will increase by only 6.7 per cent. It is spurious to claim that there is an increase of 40 per cent.
There is a change in the banding, which will certainly impact on the revenue collected by the Exchequer. However, that puts an obligation on Her Majesty's


Opposition to state where they propose to get the additional £25 million in revenue which this measure would raise. There is no question of it damaging jobs in the industry or of casinos leaving London. There is no question either that the Opposition will be extremely hard pressed to state from where that £25 million should come.

Dawn Primarolo: I am amused by the image that the hon. Member for Sevenoaks (Mr. Fallon) has of my hon. Friend the Paymaster General. He apparently believes that my hon. Friend possesses some qualities that I do not and that I do not know enough about casinos and have never visited any. Presumably, the hon. Gentleman believes that I do not have a playgirl image—although he felt able to make a pun about the fact that my first name is Dawn. I suppose that, in some respects, that reveals his perception of these matters—which seems rather shallow.
The hon. Gentleman advanced the case that the previous Government were benign to the casino industry because it was important to the economy. Yet they kicked manufacturing industry all around the room in terms of their support for it.
The proposal is not ill thought out. I shall deal with the amendment and with the Government's intentions. If the amendment was designed to encourage the Government to reconsider the proposal, the rather ungenerous tone in which the hon. Gentleman advanced his case would lead me to suggest to the industry that it should look for another spokesperson in the House, who concentrates more on the industry's case and less on scoring political points against the Government. The hon. Member for Rochford and Southend, East (Sir T. Taylor) advanced that case and described the difficulties that he foresaw.
The previous Government did not consult on every tax rise. For various reasons, the Chancellor does not usually consult on changes to duty rates. For example, consultation may not be undertaken on measures that could lead to a temporary distortion in market behaviour. Clearly, the City did react to the increase in gaming duty, and consultation before the Budget may have exacerbated the problem. The Opposition's point about consultation is therefore spurious.

Mr. Fallon: I pointed out that 30 per cent. of the value of two companies quoted on the stock exchange was wiped away within days of the announcement. Does the hon. Lady accept that it might have been better to consult, at least on the detail of what she was proposing?

Dawn Primarolo: The hon. Gentleman's Government did not consult on putting VAT on fuel. Indeed, they promised not to do so, and then they did it. Now the Opposition have the cheek to say that this Government do not engage in proper consultation.
Some serious points were made in the debate, and I shall reply to those. That is how the Committee would expect us to respond. The argument covered four categories: the phasing of the introduction of the increase; bad debt; indexation; and the structure of the bands that are being introduced, to which the hon. Member for Rochford and Southend, East referred particularly. He argued that the burden of the increase falls less on the profitable casinos and more on those in the middle band.
Reducing the bands would not result in casinos other than the top, most profitable clubs paying increased amounts of duty. The Government's proposal is deliberately designed to spread the burden of the tax, attaching it to those casinos most able to bear it. It is the Government's opinion that the industry pays an unfair level of tax: it could pay additional tax. The industry's response has not been to dispute whether it could afford to pay the increase or whether it should pay it, but to argue about the distribution of the tax.
We reject amendment No. 14. as we do not believe that it provides the way forward. Moreover, it is technically flawed. Our solicitors advise us that it is not possible to amend the Bill in a way that commits the Government to the indexation of duty bands. The table in section 11(2) of the Finance Act 1997 would need to be amended with the updated figures on each occasion that the bands were indexed, and on each occasion a clause would be required specifying when the changes came into effect.
Let me deal first with the changes to the gaming duty bands and the top rate of gaming duty. The House will wish to know that the casino industry is under-taxed compared with most other betting and gaming sectors. However, there is little scope for increasing the duty burden on smaller, less profitable casinos.
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There is every indication that the casino industry is thriving and can afford to pay the increased duty. Receipts of gaming duty are up on previous years, and the drop—the amount staked at a casino—has increased, particularly in larger, more profitable casinos. In the 12 months to December 1997—the most recent figures we have—the drop in larger, more profitable casinos increased by around 8 per cent. over the previous 12 months, and the gross gaming yield increased by around 10 per cent. That demonstrates the industry's ability to pay more tax.
Secondly, I am aware of the industry's representations on indexation, and I am persuaded that there is a case for creating an environment that allows the industry and its investors a reasonable level of certainty in which to operate and plan. Therefore, I am prepared to give a commitment to index the gaming duty bands for the remainder of this Parliament.
That said, I should make it clear that, if the business climate in which the casinos operate were to change significantly—through further deregulation, for example—we would not rule out the possibility of further restructuring the duty in future, to ensure that the level of taxation remained fair. Subject to that proviso, I accept the principle of indexation for the lifetime of this Parliament. However, the amendment proposed by the Opposition is unacceptable, in that it attempts to nullify the changes to the duty bands and rates, and is technically flawed by the way in which it deals with indexation.
I now turn to the restructuring of the bands proposed in amendment No. 15. I am not persuaded by the argument that the amendment would reduce the liability of London casinos as the proposed changes would significantly reduce the revenue that we intend to collect from the casino industry. It is quite clear to the Government that the industry can afford to pay the additional duty.
I am aware of the trade representations concerning the structure of the duty bands, in particular the impact of the Budget changes on some of the less profitable London


clubs—those with gross gaming yields of between £5 million and £12 million—and the points that the hon. Member for Rochford and Southend, East made about his experience in Southend.
I shall continue to ensure that the forecast revenue yield on the measure is maintained, but as a member of a Government who are prepared to consult and listen, I am prepared to consider the industry's proposals on the best way forward in respect of the structure of the bands. As has already been said, my officials continue to discuss the issue with representatives of the industry. I shall report back to the House with my findings.
The amendments are unnecessary and defective, and do not represent the best interests of the taxpayer in ensuring that the Government receive a fair tax yield from the casino industry. As I have said on a number of occasions, the industry is under-taxed compared with most other betting and gaming sectors, and we believe that it can afford and should pay the proposed increase in the name of fair taxation. Therefore, I ask the Committee to reject amendments Nos. 14 and 15, and support the Government in the clause. I hope that my comments tonight, particularly on indexation and restructuring the bands, will be helpful to the Committee.

Mr. Fallon: This has been one of the most rewarding debates that we have so far enjoyed in Committee and, perhaps, in this Parliament. I thank my hon. Friend the Member for Rochford and Southend, East (Sir T. Taylor) for drawing the Committee's particular attention to the plight of provincial casinos. That has been well highlighted tonight, and I am sure that the Government are now aware of the impact of what they propose, which does not fall entirely disproportionately on London but, as my hon. Friend so skilfully pointed out, also impacts on some of the provincial casinos.
I thank the hon. Member for Kingston and Surbiton (Mr. Davey) for his support for the amendment. He well illustrated the differential effect of the Government's proposals and the uncertainty caused to an industry that expected the Government to continue the well thought out deregulation proposals of the previous Government.
I thank my hon. Friend the Member for South Cambridgeshire (Mr. Lansley) for the detailed flaws that he exposed in the Government's proposals. Conservative Members were amazed to hear the hon. Member for Brent, North (Mr. Gardiner) sneer at the effect on London employment. In this his capital city, 4,500 people are employed in the industry. He did not seem to think that that mattered. He did not seem to think that it was even worth concentrating on the difference between gross profit and gross yield.

Mr. Gardiner: rose—

Mr. Fallon: Before the hon. Gentleman tries again, I remind him that we are talking here not about the difference between the effective rate levied previous and subsequent to the Budget, but about the difference in duty. The difference in duty for casinos with a yield of between £5 million and £12 million, is an increase of the order of 50 per cent., and for casinos above that, an increase of between 40 per cent. and 30 per cent.—not of the order that he suggested.
Finally, I come to the Financial Secretary's remarkable speech. We had some blustering about the Government not needing to consult. That was not what we heard last

night from the Paymaster General. He took a pride in the consultation. He admitted that the Government got it wrong on individual savings accounts and on corporation tax. He took pride in the fact that the Government were ready to come to the House and correct the detail.
We heard a new theory on consultation tonight—that the Government can levy any duties that they think of, and, if they get them wrong, it does not matter. Happily for the casino industry, and happily for our future considerations on the Bill, the Financial Secretary has run up the white flag. She has accepted for the first time in our proceedings the principle of a Conservative amendment. She has said—we thank her for this—that the Government accept amendment No. 14. The first time that any Government have considered the principle of indexation for casino duty, she has said that a Labour Government have to be bound by it. Only a Labour Government could suddenly impose the kind of duties with which the industry were faced, which wiped 30 per cent. off the share value of two of London's leading operators.
The Financial Secretary pointed out quite fairly that, in some respects, amendment No. 14 may be technically defective. Fine. But she has accepted the principle of indexation. Never again will she or her Chancellor in this Parliament come to the Dispatch Box and impose that kind of 40 per cent. increase. Tonight, the Financial Secretary has run up the white flag and said that she accepts that gaming duties should for ever be indexed to the retail prices index. We thank her for that and for her surrender, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Mr. Fallon: I welcome this debate, which is necessary only because the Financial Secretary did not respond to some of the general criticism made by me and the hon. Member for Kingston and Surbiton (Mr. Davey).
When the Conservatives left office almost a year ago, we left in train a sensible, well-planned programme of deregulation, whereby there would be new casinos in different areas of the country and—picking up on the well-worn theme of modernisation—the casino industry would be modernised. We suggested liberalising the gaming industry by allowing, as the hon. Member for Kingston and Surbiton mentioned, a more enlightened membership system that would include postal and group membership, whereby groups of visitors from America and beyond could pre-book tours of London casinos. The programme would allow a modest measure of advertising—not nationally, but in telephone directories and hotels.
Finally, we advocated deregulating the industry to enable certain casinos to have more gaming machines. We suggested an increase from six machines to 20.
We should not pass the clause without raising those issues, because we will have no further opportunity to do so during the consideration of the Bill. I understand that almost all that deregulation has been put on hold. Measures that were expected to be implemented last October were delayed until this spring, and, as the Chancellor of the Duchy of Lancaster confirmed to the Select Committee on Deregulation this morning, they are


further to be put on hold. The industry faces not simply a massive, unjustified increase of 40 per cent. in duties, but no guarantee of further progress in the deregulation that the previous Government set in train and to which we thought the successor Government were committed.
It would not be right for us to give the clause final approval without hearing from the Financial Secretary what proposals she has to implement the deregulation measures that we set in train. If she does not want to prolong the debate or encourage me to intervene again, I hope that she will explain to the Committee why the clause should stand part of the Bill.

Question put and agreed to.

Clause 11 ordered to stand part of the Bill.

To report progress and ask leave to sit again.—[Mr. Robert Ainsworth.]

Committee report progress; to sit again tomorrow.

Orders of the Day — Planning Permission

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Robert Ainsworth.]

Mr. Oliver Heald: I am glad to have an opportunity to raise the issue of the operation of section 100 of the Town and Country Planning Act 1990. It may seem a dry subject, but when it is applied to the circumstances that have arisen in my constituency, it becomes of great importance.
Section 100 allows the Secretary of State to revoke planning permission that has previously been granted. I raise the issue against the background of what has happened in Radwell. I shall outline the history of the case, then ask the Minister what assurances he can give. That will be the best way to examine section 100 in the context of the problem in my constituency.
In 1992, an application was made to build a motorway service area at junction 10 on the Al(M). That site is next to Radwell, a pretty Hertfordshire village with a lake, which is well known locally as a beauty spot. There was great concern locally when the scheme was promoted; those who objected included most of the residents of the village, the parish council and local residents such as Nigel Hawthorn, who said, "No, Minister," on that occasion.
During 1992, the campaign grew, and, early in 1993, it became apparent that a planning inquiry was required. The statutory consultees for the planning process were served with the original planning application and the plan that went with it. One of those consultees was the National Rivers Authority, which had an opportunity to consider the plan. At that stage, the scheme was to cut very little into the chalk on the top of the hill at Radwell, so it seemed that, with conditions, the scheme could be acceptable. The National Rivers Authority put forward its recommendations on that basis, although it pointed out that it had a separate jurisdiction to grant a licence for water abstraction, or consent to discharge water and sewage off the site, and it made it clear that it would look at all the environmental protection aspects at that point.
Shortly afterwards, just before the inquiry team met in 1993, a new plan was produced. It was never shown to the National Rivers Authority. The inquiry proceeded for seven days, and was bitterly contested. After much deliberation, the inquiry inspector came out in favour of the scheme, and the Secretary of State approved it finally in September 1994.
The background to the scheme is that the A1(M) was to be widened. A motorway service area seemed a good idea, at least to the developers. Much of the purpose of the scheme collapsed shortly after planning permission was granted, because the widening was not to go ahead within the roads programme. There was then a long delay of three years before anything else happened. At that point, an application was made for detailed planning permission.
By that time, the National Rivers Authority had become the Environment Agency, but when it saw the detailed planning permission, it was clearly horrified because the depth by which the scheme would cut into the chalk on the hill at Radwell was far greater than it had realised. The difference between the first and second plans was that, instead of the site being developed on the top of the


hill, it was to be depressed by some 6 m into the hill. That was proposed for the best possible reasons: the developers wanted to screen the local landscape from the motorway service area, to meet one of the key objections.
However, the effect in environmental terms was serious. The NRA never knew that. When the Environment Agency saw the detailed plans, it put in what could only be described as a strong objection to the detailed planning permission.
In its objection letter of 7 October 1997, the agency said:
Groundwater boreholes in this area indicate groundwater level is only 4.5 metres below ground level hence the development would be positioned below the water table.
The Agency objects to the proposed development as submitted on the following grounds. The site is located over a vulnerable 'major' aquifer used extensively for potable water supply"—
drinking water, that is—
…The proposed development including storage of fuel, drainage of car parking, foul water disposal and substantial reduction of ground levels represent a major risk of pollution to ground waters at this location.
Let me explain that a bit. The hill at the top of Radwell is a chalk aquifer like a large sponge. The water from the aquifer feeds into the River Ivel and the Radwell lake, and becomes a tributary of the River Ouse. The aquifer is therefore quite an important component of the drinking water supply in our part of the eastern region.
There is an additional aspect. Putting the site so deep into the chalk meant not just that oil and other pollution would sink into the sponge—the aquifer—and cause a major risk of pollution, but that the two local rivers, the Ivel and the Hiz, which rely on the aquifer to be provided with water, might well be disrupted. It was possible that the drinking water supply would be contaminated, and that there would be problems affecting the supply of water from two local rivers, both of which have been dry in recent years, following the lack of rainfall. There was a prospect of serious problems.
In its objection letter, the agency said that it would be prepared to support its decision with evidence at an appeal. Following that, the NHDC was very anxious, and took the matter up with the Government office for the eastern region. Many local residents took the matter up with me, and I have made my only inquiries with all the relevant authorities. I had the opportunity, with Michael Meredith Hardy, the campaign co-ordinator, to meet the Environment Agency regional general manager.
When the objection letter went in, the Environment Agency thought that it might be able to stop the scheme. It is clear from my researches, however, that, once the detailed planning permission stage is reached, an issue of principle such as this cannot be dealt with at that stage. It seems that a major pollution risk may well be there, but it is hard luck, in that the decision has already been made. That is essentially what is said in letters to me, and to others, by all relevant authorities.
To local residents, the local councillor, to North Hertfordshire district council and to me, it is simply unacceptable that such a gross error can be made in the planning process and nothing can be done about it. It simply is not acceptable that the water supply in our area can be contaminated, and rivers can be made dry, because of some mistake in the planning process. I think

that everyone locally shares that view. I ask the Minister whether it is possible for section 100 to provide some relief.
Section 100 says that it is possible for the Secretary of State to revoke a planning permission. I understand that, when the matter has been considered in the House on earlier occasions, it has been said that, if there is a gross error and if a substantial public interest is involved, it is possible to exercise the power. Perhaps the Minister will give some reason why that cannot be done. I hope not. Plainly, there should be a fail-safe mechanism in the planning process so that such problems cannot lead to the risks that the Environment Agency has outlined. The agency is taking legal advice on the matter. I have asked for a meeting with Lord De Ramsey, who is the chairman of the agency, and perhaps a formal application will come to the Minister.
The debate gives the Minister the opportunity to explain whether there is a fail-safe mechanism. If there is not, there jolly well should be. The scheme is a disaster for Radwell, anyway. People do not want to be illuminated all night by a motorway services area. They have been dead against the scheme from the moment it started. It is one thing to have an ugly scheme on one's doorstep, but another to have one that actively damages the environment.
What is the Minister's response to the difficult situation in Radwell? Perhaps he could put the matter in context and explain the operation of section 100 in such circumstances.

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Nick Raynsford): I congratulate the hon. Member for North-East Hertfordshire (Mr. Heald) on securing the debate. I am grateful to him for writing to me in advance with details of his concerns, because that enables me to give a fully considered response.
I am pleased to have the opportunity to respond, as it enables me to explain the Government's policy on the revocation or modification of a planning permission, and to cover the hon. Gentleman's concerns. I hope that, by the end of the debate, he will be reassured that there are safeguards that will protect the interests of his constituents.
Section 100 of the Town and Country Planning Act 1990 is a default power. It enables the Secretary of State to take action to revoke or modify a planning permission, after following specified procedures. There is provision for compensation to be paid by the local planning authority should a claim subsequently be made by a person with an interest in the land.
The Secretary of State's practice is to use the power only rarely. Like earlier Secretaries of State, he takes the view that the power should be used only if the original decision is judged to be so grossly wrong that damage is likely to be done to the wider public interest. He may also be prepared to exercise the power to revoke a planning permission when he considers that consistency is needed between a planning authority's decisions in different cases to ensure that similar circumstances give rise to similar decisions and that the provisions of the development plan, so far as it is material, and other material considerations have been fully taken into account.
It should be remembered that development plans aim to give a measure of certainty and predictability to the system. Section 54A of the 1990 Act requires that, where the development plan contains relevant policies, applications for development that are in accordance with the plan shall be allowed unless material considerations indicate otherwise. Conversely, applications that are not in accordance with relevant policies in the plan should not be allowed unless material considerations justify granting a planning permission.
The Government and local authorities work through the planning system to reconcile the conservation of the environment with development needs. That task cannot always be carried out to everyone's satisfaction. It often involves the difficult task of reconciling finely balanced issues. It would be wrong, as well as impractical, routinely to review instances when planning permission has been granted against that background.
I should emphasise that a planning permission may, in general, only be revoked or modified before the operations permitted have been completed. It may be modified or revoked if it has been partially exercised, but revocation or modification orders cannot affect any development that has been completed, and cannot be made in respect of a change of use once that change has taken place. That does not apply in this case, but I mention it so that the hon. Gentleman may be aware of the ground rules.
Section 100 is available to the Secretary of State to use as he thinks fit, after consultation with the local planning authority. As I have said, intervention by the Secretary of State can be justified only in exceptional circumstances. Between 1955 and 1992, the power was utilised to revoke a planning permission in only 19 cases. Since then, there have been only two more, the most recent of which was in March this year. Although not commonplace, it is more usual for local planning authorities to initiate their own revocation or modification orders under section 97 of the Town and Country Planning Act 1990.
To set the figures I have just given about the Secretary of State's use of the default power in context, I remind the hon. Gentleman that local planning authorities deal with up to 500,000 planning applications each year, of which 85 per cent. are approved. Revocation is the exception.
The power is used only in exceptional circumstances, as Parliament has given local planning authorities responsibility for development control in their areas. It is for them to decide in the first instance whether a proposal should be permitted. The Secretary of State's intervention might overturn the local planning authority's judgment of a matter which is in the first place its responsibility.
The hon. Gentleman has given much of the background to the proposed motorway service area at junction 10 of the A1(M) at Radwell in Hertfordshire. I shall recap briefly. The outline planning application was made in 1992. Following non-determination by the local planning authority, an appeal was lodged with the Secretary of State. After a local public inquiry in 1993, the then Secretary of State granted planning permission in 1994, subject to conditions and reserved matters.
The application for approval of reserved matters was made to the local planning authority, North Hertfordshire district council, last year. At that stage, the Environment

Agency objected on the ground that site excavation would breach the water table and threaten water supplies and water courses. In October 1997, North Hertfordshire district council approved the reserved matters, but drainage and water supply conditions remain to be satisfied. That is crucial. Until those conditions are discharged, development cannot start.
The hon. Gentleman has made much of the amended plans put to the inspector at the inquiry, which he accepted before recommending approval of the scheme. I understand that, in the interests of natural justice, the inspector asked at the start of the inquiry whether there were any objections to his accepting the amended plans. None was made, and he proceeded to determine the appeal on that basis. Had the inspector considered the revised plans to be so different as to change the nature of the proposal fundamentally, he would have declined to consider them, and the appeal—

Mr. Heald: The difficulty was that the National Rivers Authority had seen the original plans and made its comments on them. It was unaware that there were any new plans, because it was not represented at the planning inquiry. That is one of the faults in the process that has been adopted. Does the Minister have any thoughts on that?

Mr. Raynsford: I understand the hon. Gentleman's point. I have two comments to make in response. First, no one objected to the revised plans, although I understand that the NRA may not have been represented. Secondly, the inspector would have had to form a judgment on whether the revised plans differed so materially from the original as to make it impossible for him to consider the application. Had he believed that, he could not have proceeded with the application on the basis of the revised plans.
I do not doubt the genuineness of the Environment Agency's concerns over a possible pollution risk to the groundwaters in the area. The hon. Gentleman is rightly concerned about that as well, because it affects the livelihood and well-being of his constituents. However, the inspector considered the issue in his report and was satisfied that, subject to certain conditions to control emissions to groundwater and streams, there would be no risks from the development. Conditions to that effect were imposed by the then Secretary of State when he granted planning permission.
The local planning authority has not made any decisions on compliance with those outstanding conditions from the original consent. If the development is to proceed, the site owners must negotiate with the Environment Agency to find technical solutions to the drainage and water table issues. Unless that is done, the local planning authority will not discharge the outstanding conditions. If that continues to be so, planning permission will lapse in late 1999.
Alternatively, it is open to the site owners to submit revised proposals to North Hertfordshire district council if they consider that another solution to the problem can be found.
For the policy reasons already explained, I do not consider that there are grounds to justify my right hon. Friend the Secretary of State taking the exceptional course of revoking the planning permission. It would certainly be premature, given the need for negotiations to ensure


compliance with the conditions already imposed. In any case, if the Secretary of State were to take that course following a local public inquiry, a claim for compensation from the developer would be likely. Such claims can be very substantial. I should stress that the claim is not against the Secretary of State but against the local planning authority. For that reason, revocation of a planning permission must be seen as a very serious matter for the authority.
In this case, as I hope that I have demonstrated, there is an alternative remedy. The Environment Agency has to be satisfied with the site owners' proposals for dealing with the problems in order to give its consent to the local planning authority agreeing to discharge the conditions. As I have already implied, if that agreement is not given, development cannot proceed. There is a safeguard in

place. I hope that that reassures the hon. Gentleman that his concerns are respected, and that there is a proper safeguard in place to meet them.
I repeat that, if the development is to proceed, the site owners must negotiate with the Environment Agency to find solutions to the problems that the hon. Gentleman has identified. Unless that happens, the local planning authority will not be in a position to discharge the outstanding conditions, and therefore no development can take place. I hope that that reassures the hon. Gentleman that the fears that he has described need not arise, and that there are sufficient safeguards in place to ensure that the interests of his constituents will be properly protected.

Question put and agreed to.

Adjourned accordingly at twenty-four minutes to Eleven o'clock.